Dorchester Pacific debenture holders face a hard choice this month.
Either they support a capital-raising or risk the finance company going into receivership and losing what money they have left invested.
Perpetual Trust and Dorchester Pacific laid out the stark choices in statements yesterday while playing up the so far successful repayment by Dorchester of 50c in the $1 to investors since the company went into moratorium in 2008.
Perpetual Corporate Trust spokesman Matthew Lancaster said Dorchester's original deferred repayment had been more successful than many predicted, in that the company had already returned half of the amount owed.
But the latest plan addressed how investors could potentially recover the other 50c.
If approved, the plan would result in investors swapping their debentures for four different securities.
"This capital reconstruction plan is quite different to others that have been put in front of investors in other finance companies and, in our view, is worthy of investors' consideration."
The capital reconstruction plan broadly had two interdependent aspects, he said.
First, the debenture stockholders and subordinated noteholders would be voting to determine whether they supported the restructure.
If that was successful, then Dorchester's shareholders were being asked to approve the plan and support a rights issue to raise a minimum of $8 million to strengthen the balance sheet.
Major shareholders Business Bakery and Hugh Green Investments had agreed to underwrite $7 million of the $8 million at 35 million 10c shares each.
Mr Lancaster said the independent report commissioned by Perpetual suggested the plan would lead to a strengthened balance sheet and provide a foundation for growth.
The four securities to be offered provided different returns over different periods.
If any of the conditions to the plan were not met, then the board of Dorchester Finance was of the view that receivership would be the likely outcome, Mr Lancaster said.
The properties owned by Dorchester Finance were: Goldridge Resort, Queenstown, valued at $8 million; 23 apartments in Parkview on Hagley, Christchurch, valued at $10.2 million; and Emerald Hotel, Gisborne, valued at $12.6 million.
There were 38 apartments in Frankton Arms Apartments, Queenstown, valued at $2.2 million, which were currently subject to a High Court-controlled mortgagee sale process.
Dorchester Finance expected to acquire that property at the mortgagee auction.
The units prospectus was due to be registered tomorrow and a meeting of stockholders and subordinated noteholders to approve the capital reconstruction would be held on June 30.
The expected date for the reconstruction was expected to be August 24.
Craigs Investment Partners broker Chris Timms said there were still some key risks for investors, not the least being that Dorchester still ended up in receivership.
Dorchester still faced raising bank funding of about $28 million and, in 2013, $10 million of new shares and $10 million of new secured notes.
"But what's the alternative? If they don't do it, there will be receivership which could start a firesale of assets," he said.
