An 11th-hour deal to pay Dunedin-based creditors $4.5 million from the collapse of private investment company Hurricane House has fallen over, with the debtor placed in bankruptcy.
With total claims of $17 million outstanding against Christchurch-based Fendal Finance and a $10 million shortfall, the likelihood of a payout for about 50 southern investors in failed Hurricane House looks bleak.
Hurricane House, a private investment and finance company owned by Paul Nicholson, of Dunedin, was placed in voluntary liquidation in March, owing almost $8.5 million to 50 mostly southern investors.
Its largest loan, $4.5 million, was to Fendal Finance, owned by former Dunedin businessman Gray Ussher, who gave a personal guarantee for a $4.5 million loan.
In what is a highly unusual business practice, no securities were held against the $4.5 million.
In May, Mr Ussher placed Christchurch-based Fendal Finance in voluntary liquidation, owing $17.1 million to at least 28 creditors.
Insolvency Management Ltd liquidator Gus Jenkins, of Dunedin, said yesterday that, following extensive negotiations since May, "an agreement had been reached between the parties" in recent weeks to settle the $4.5 million debt.
However, "at the last minute, one of the parties pulled out".
With no payment forthcoming, Mr Jenkins said Insolvency Management, representing the Hurricane House investors, successfully petitioned for Mr Ussher to be declared bankrupt in the High Court at Christchurch last week, for a sum of $4.54 million.
Mr Jenkins said the Official Assignee had been appointed to oversee the bankruptcy and it was unlikely they would be in a position to post a report until some time next month.
Mr Jenkins has described the unsecured $4.5 million loan as "high risk " and a "major exposure" for the southern investors, many of whom had borrowed heavily against the equity of their homes to invest in Hurricane.
It was understood a house in Auckland had been sold for several hundred thousand dollars, and a statutory demand had been filed on a reassigned debt originating from a loan to an Australian gold mining company.
There was also a Dunedin property and bare land in Canterbury's high country for sale, but both were understood to have several mortgages over them.
Mr Ussher, once a Dunedin-based finance company director, had been operating Fendal Finance in Christchurch since its incorporation in January 1998.
Fendal was a second-tier financier of both residential and commercial borrowers.
Its liquidators have said it failed due to the high proportion of writedowns for its portfolio size and because distressed loans owed to it had affected Fendal's ability to pay its own debts on time.
Similarly, Hurricane was placed in liquidation because it had several large loans defaults.
