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Dorchester Finance starts series of presentations

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, June 21 NZPA - Dorchester Finance has started a series of presentations around the country ahead of a vote on a plan to end a moratorium.

The plan has already been mailed to investors and the company faced investors at the first presentation in Auckland today. Presentations follow in Christchurch and Dunedin tomorrow, Wellington on Wednesday, Palmerston North and New Plymouth on Friday and Tauranga on Saturday. Chairman designate Grant Baker and executive director Paul Byrnes are fronting the presentations.

Businessday.co.nz reported that debentureholders called for the company's plan to be rejected and for receivers to be called in.

Dorchester Finance needs 75 percent approval from all three stakeholder groups.

"So far we have done better than most by paying back 50 cents in the dollar to our debentureholders, but we are far from satisfied with that. We can do better," Mr Baker said.

He said full repayment to debentureholders was a realistic possibility.

"But we have to change with circumstances. Our original plan which got support in late 2008 has got us so far but we now have to overcome new obstacles of declining property values and lower interest rates. We believe we can still move forward with some hard graft," he said.

In December 2008, Dorchester's investors voted in favour of a deferred repayment plan. At that time the company had $163.7 million of secured debenture stock and $8m of subordinated notes on issue. As at March 31 stockholders had received payments amounting to $81.85m -- half their principal investment.

But since the start of the deferred repayment plan, Dorchester had property loan losses that were not anticipated in initial forecasts, resulting in a deterioration of net assets and shareholder funds.

Updated financial forecasts suggested a risk Dorchester would be unable to meet scheduled commitments, including one this month. In response Dorchester proposed the capital reconstruction plan, which is to be put to a vote of investors in Auckland on June 30.

Under the plan four new securities are to be issued to debentureholders in return for their outstanding debenture stock.

Those securities are units in a unit trust holding four hotel properties, $20m in aggregate of three-year secured interest bearing notes, shares in Dorchester, and options to acquire further shares.

The plan is also conditional, among other things, on Dorchester raising a minimum of $8m of new capital in a $10m capital raising.

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