Torchlight gets money, seat at the table for SCF fallout

Torchlight Fund may have invested in South Canterbury Finance (SCF) hoping for a receivership to put itself at the table for the sorting out process, according to an investor in Pyne Gould Corp (PGC).

PGC confirmed today that the $100 million loan facility provided to SCF by parties including Torchlight Fund No 1 LP has been repaid in full as part of the government bailout of SCF. Torchlight had a minority stake in the loan, PGC said.

Torchlight Investment Group is owned by PGC subsidiary Perpetual Group and its directors are John Duncan, Jeff Greenslade, George Kerr and Bryan Mogridge. It was previously known as Perpetual Asset Management Ltd.

Torchlight Investment Group was the arranger of a $100 million loan facility which provided funding to SCF with a priority ranking.

The Government decided to pay out Torchlight to simplify the receivership of SCF.

"We suspect that Torchlight has invested in SCF actually hoping for receivership. By placing itself at the table Torchlight increases the possibility of playing a significant part in any sorting out of SCF should it be wound up," Aspiring Asset Management, a PGC shareholder, said in its June quarter newsletter.

PGC has a 15 percent stake in Torchlight Fund, according to Aspiring Asset Management. It also manages the fund.

Aspiring said that the failure of SCF may affect the propensity of investors to put money with second-tier finance organisations when the Government guarantee ends in December next year.

"But, on the other hand, it would also reduce competition," Aspiring said.

Marac, the finance company business owned by PGC, was skilfully going down the route of upsizing via merger and looking to become a bank, Aspiring said.

Perpetual Group Ltd chief executive John Duncan declined to say what interest rate Torchlight Find was receiving on its loan to SCF and also declined to say who the investors in Torchlight Fund are other than PGC.

PGC said Torchlight Fund has the backing of a range of domestic and international investors and investment companies, including leading specialists in credit and real estate private equity.

It has capital of $150m following a successful capital raising in July.

Torchlight Fund specialises in making counter-cyclical investments at a time of low liquidity in the banking and investment sectors. Following the successful investment into SCF it would continue to look for situations to provide funding, PGC said.

The repayment comes at a time of debate about the unintended consequences of the Crown's Retail Deposit Guarantee Scheme.

It has been reported that SCF received a rush of deposits because of the guarantee and then came under funding pressure as depositors withdrew money ahead of a reduction in the amount guaranteed in the extended scheme operating from this October through to the end of next year.

Also, many finance companies collapsed before the scheme was introduced in October 2008 and investors suffered losses.