Wellington, May 28 NZPA - KordaMentha, second receivers in Capital+Merchant Finance, said today investors may get less than 10 percent of their money back and are unlikely to get any this year.

The receivers said that a loan securitisation undertaken by C+M before receivership may have invalidated insurance on a substantial portion of the company's loan book.

Legal advice had been taken on insurance policies in place to underwrite a portion of the loans that were funded by Capital secured debenture stockholders.

KordaMentha said the issues were complex and would take time to work through.

"Until they have been resolved it is not possible for us to determine whether or not recoveries, on a loan by loan basis, will be possible under the insurance cover.

C+M Finance, along with subsiduary Capital+Merchant Investments, was placed in receivership in November, owing around $188 million to 7000 investors. Debenture holders are owed $168m.

In their first report on the companies' state of affairs in January, first receivers Richard Simpson and Tim Downes of Grant Thornton said C+M had loans and advances totalling $182.6m and secured investors could get 59 percent of their money back.

KordaMentha said C+M's loans were primarily property related and many of them were of questionable quality.

"These matters, combined with the difficult economic climate in New Zealand, which is affecting liquidity and also property values, will result in significant losses being suffered on the majority of loans."

So far the first receivers had only achieved a modest level of loan recoveries and asset realisations so they had not yet been able to repay Fortress Credit Corp. Nor could they say when this was likely. No repayments could be made until the $20m owed to Fortress had been repaid.

"From the information that we have access to we are presently of the view that the recoveries, once Fortress has been repaid, might be as low as under 10 cents in the dollar," KordaMentha said.

"This excludes any recoveries obtained under the insurance cover (if such is available) and from any claims that may be able to be made against parties who have been involved with the company and which are being investigated as a matter of course."

KordaMentha said returns would depend on whether investors were invested in Capital Secured Deposits or not.

"Unless the current economic climate improves we think it is unlikely that any distributions will be made to investors this calendar year."

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