Investors in finance company St Laurence must decide on swapping their debt for equity, or face the prospect of the company running out of cash and being placed into receivership.
The Wellington-based company was placed in moratorium in mid-2008, owing $250 million to 9000 investors, but its board said yesterday it would "soon" run out of equity and not be able to meet repayments to investors under its recapitalisation plan.
It had hoped to repay all funds owing over 13 years and, so far, 8c in the dollar had been paid to debenture holders, and 4c in the dollar to capital note holders.
St Laurence managing director Kevin Podmore said that "due to the extremely difficult property market, the company would soon be in a position where it would run out of equity" and would not be able to meet some of its obligations to investors under its November 2008 recapitalisation plan.
St Laurence will ask investors to exchange their debenture stock and capital notes for shares in St Laurence Holdings Ltd, which was established to acquire St Laurence's assets.
"If this proposal is not approved, St Laurence will be placed in receivership," Mr Podmore said.
Southern investors are unlikely to be immune to the problems faced by St Laurence.
In December 2005, St Laurence purchased and took over the management rights for the then Dunedin-founded National Property Trust, which was privately owned by four shareholders, including former Dunedin businessman Paul Dallimore, for an undisclosed sum.
St Laurence said yesterday its two major property based funds were the New Zealand stock exchange listed The National Property Trust and Irongate Property Ltd, trading on the exchange's debt market.
Craigs Investment Partners broker Peter McIntyre said investors faced the likelihood of either a long receivership, wind-up and eventual partial payout, or they had two choices if they opted to approve the debt for equity swap.
That deal at least offered investors the chance to take shares and sell them now, while other investors could choose to hold the shares long term in the hope of recovering their asset value during coming years, Mr McIntyre said.
"St Laurence has come to the end of their cash position; but they will have some significant properties in Wellington and have the [management] contracts with National Property and Irongate," he said.
If investors chose the debt-for-equity swap, the new company, St Laurence Holdings Ltd, could list on the New Zealand exchange or Unlisted exchange to enable trading in shares, but St Laurence did not release any details on that yesterday, Mr McIntyre said.
Mr Podmore said St Laurence's directors had commissioned an independent report from Grant Samuel to analyse the merits of the alternatives faced by investors, to assist in their decision.
"We appreciate this is not what investors signed up for nor the outcome we had hoped for when we put forward the recapitalisation plan in 2008.
"We understand that investors want their money back and in the current market we sincerely believe that exchanging their debt investment for equity is the best way to achieve this," he said.
