Govt to claw back as much as 70% owed from Equitable Mortgages receivership

Thursday 16th February 2012

Taxpayers may claw back as much as 70 percent from the receivership of failed lender Equitable Mortgages, according to the receiver’s latest update.

KordaMentha’s Grant Graham estimates in his latest report that loan recoveries might let the receiver repay between 65 percent and 70 percent of the $192.3 million owed to the Crown and secured debenture holders. That equates to between $124.9 million and $134.6 million. Unsecured creditors are owed some $25,000.

“We believe it is extremely unlikely there will be a return to unsecured creditors and we expect there to be a shortfall owing to investors and the Crown,” Graham said in his report.

At the time of receivership, Equitable Mortgages had loans worth $188.4 million to be recovered, net of provisioning for impairments. Since then, the receiver has paid out $50 million to investors and the Crown. Between June 19 and Dec. 18, the receiver received almost $26 million in loan repayments, and a further $612,000 in loan interest.

The bulk of the funds are owed to the government, which has paid out 97 percent of the $178 million to about 6,000 investors whose debentures were covered by the now-defunct retail deposit guarantee scheme.

Graham said he is looking at a potential claim on loan loss cover policies issued on Equitable Mortgage’s loan book by related company, Equitable General Insurance (EGI).

“We are assessing the claim that can be made under these policies and discussing with EGI its ability to meet these claims, which we expect will significantly exceed EGI’s reserves,” he said. “Our recovery estimate above does not allow for any recovery from these policies.”

Equitable Mortgages, which was controlled by the family of the late Peter Spencer, called in the receivers in November 2010, blaming ongoing asset deterioration, dwindling loan business and a lack of investment appetite for its failure.

Deloitte was initially appointed, but had to step aside after missing a conflict of interest with its audit team during the tender process.

Graham said he has yet to receive a claim from the Inland Revenue Department.

BusinessDesk.co.nz

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