UPDATED: St Laurence woes shouldn't spill over to Property and Finance

Monday 24th August 2009

The threat of receivership hanging over embattled finance company St Laurence Ltd. probably won’t spill over to St Laurence Property & Finance, according to Kevin Podmore, a director of both companies.

Podmore is in talks with the trustee for St Laurence Ltd., Perpetual Trust, to try to stave off receivership amid concern the company won’t be able to meet the terms of its moratorium. Some 9,000 investors owed $250 million in frozen funds last year agreed to give the company until 2013 to repay 70% of its debentures. There’s “a material uncertainty” about its ability to make the payment, according to its annual report.

“We’re very hopeful St Laurence (Ltd.) won’t be put in receivership and are having discussions with the trustee,” Podmore told a meeting of St Laurence property & Finance investors in Wellington last week.

St Laurence Ltd. owns about 35% of Property & Finance and manages its property portfolio through another entity, St Laurence Funds Management Ltd., stoking concern that Property & Finance could be “tainted” by the financial woes of its associates.

Podmore said even if St Laurence Ltd. fell into receivership, it wouldn’t be in the receiver’s best interests to drag Property & Finance down with it. In hindsight, the group should have sold property assets before their value was hurt by the financial crisis, and banked the proceeds.

“We cocked up – we should have sold when the property was performing and we should have banked some of that money – I’m sorry,” Podmore said at the meeting.

To reduce confusion about the various related St Laurence entities and ensure Property & Finance wasn’t unfairly tarred with the same brush the property developer will be rebranded.

A reduction in value for Auckland's Hilton Hotel, of which the group is a part-owner, led to the property company breaching its loan-to-value ratio requirement in its facility with ASB. The lender has granted a temporary waiver to the breach.

Property & Finance will take a more aggressive approach in selling non-performing buildings and said management was identifying development opportunities to add value to the portfolio to lift rental income.

Still, the outlook for property development over the next couple of years is grim, Podmore said.

St Laurence Ltd.’s annual report said it needed to generate “a significant level of new profitable business” to be able to meet the repayment terms of the moratorium. It recorded a net impairment loss of around $103 million in the year ended March 31, writing off some $81 million bad debt, according to the report.

In the auditor’s statement, KPMG said Perpetual Trust “may exercise its powers under the Trust Deed to place the company in receivership” if it fails to meet payments under its debt moratorium obligations, or if the value of its loans is further impaired.

A spokesman for Perpetual didn’t immediately return calls.

Since March 31, Property & Finance has cut its bank debt to $124.2 million from $145 million.

Businesswire.co.nz

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