Strategic finance

[whatsup]

Whats the latest on the news tonight?

[clips]

what news.....??

[whatsup]

Interview on 1zb last night at 10 2 6 about some issues that the company is having a developement in Fiji, can any one throw some light on the subject?

[Billy Boy]

Has 500mil on their loan book.
looking to ditch some of it...
They are using fancy words and phrases. A bad sign.:o
BB

[Billy Boy]

Nothing to worry about though
Chris Lee rates them A-
BB:)

[Reihana]

I'm sure Bernard Hickey over at interest.co.nz won't mind me copying the item below in. You'll have to read it pretty closely to spot where Hickey's questions end and Finnigan's answers start, as all the bold copy has been removed in copying it. It's very insightful stuff though. Well done to Bernard.


Strategic Finance “intensively reviewing” its business
Strategic Finance (SFL), which is ultimately controlled by troubled Australian group Allco Hit, has announced an intensive review of its business and its loan book in the wake of the collapse of Lombard Finance and the payments freeze by Dominion Finance Holdings.

“SFL continually monitors its financial position and loan book,” Strategic Finance said in a statement to the NZX.

“Given the current economic environment including the impact caused by the recent high profile finance company failures, trading halts and the slow down in the property sector, SFL will be undertaking an intensive review of its business including impairment analysis of its loan book prior to 30 June being SFL’s financial year end,” Strategic said.

It did not elborate in its statement.

I emailed Strategic CEO Kerry Finnegan with the following questions. He replied within an hour. I have put the answers in bold. I have emailed followup questions. They are at the bottom.

Do you expect this review to lead to increased provisions? This is being worked on as part of the year end sign off.

What else in the business are you intensively reviewing besides the loan book? Staffing? Lending practices? Other costs? Just the normal year end audit matters.

Are your maturing loans matching maturing debentures? Yes

Have you had any problems retrieving money from loans in the last 3 months? Yes – there are delays, some caused by activities/ events occurring outside everyone’s control such as titles issuing etc. Others are directly associated with borrowers having difficulty refinancing, settlement of pre-sales in some instances has also been slow as purchasers are also finding it difficult to source funds

If so, what proportion of your loan book is delinquent? Not sure how you define delinquent? Past due $7.99m out $574m (31 May 2008)

What types of loans are delinquent? A mix of property development and residential investment loans.

What proportion of your loan book does your top 6 loans currently make up? Circa 30%

How much of the loan book is in ‘capitalising’ loans where interest is not repaid until the development is completed and sold and the loan repaid? The majority of our loans call for interest to be capitalising

Are you looking for other ways to raise funds, other than debentures? Yes

Are you in discussions with Fortress Credit Corp? No

Are you in discussions about a capital injection? No

Are you considering a debt repayment and/or interest payment moratorium? No

I see there is one loan or debtor with an exposure worth more than 60% of your equity (NZ$70 million). Who is that and what does that relate to (Is it a specific project?) This transaction relates to our funding of the Hilton Denerau in Fji.

Have you used up all your HBOS funding line of NZ$75 million? Yes

In response to Kerry’s emailed response, I asked some follow-up questions that he answered in a phone interview.
They are (with responses in bold);

Are you in negotiations with Allco HIT about an MBO of some sort? Strategic Finance management are in discussions with Allco HIT about an MBO, but there are also other discussions happening involving other parties about one of them buying Strategic. Strategic is likely to be in a position to make an announcement within 3-4 weeks.

Is the Denerau loan in default or overdue on repayment (given it’s probably capitalizing and could be rolled over)? If it’s not overdue, when are you due to be repaid on the Denerau loan. The loan is a development loan ( a second mortgage behind HBOS) that will be repaid once a third stage of the project is completed. The timing of that is unclear given pre-sales for the third stage are slow at the moment.

Is there any risk that you will not be able to repay maturing debentures on time or make interest payments in the forseeable future (next 6-12 months)? Strategic is due to collect on NZ$280 million of loans over the next 3 months, while it has only NZ$15-20 million of debentures maturing each month. “I don’t have to get a lot of that money in to stay ahead of the eight ball.”

What is your debenture reinvestment rate currently? Say over the last month? Finnegan declined to answer this question, saying liquidity was a complex mix involving loan repayments and maturing debentures and Strategic’s maturing loans broadly matched its maturing debentures.

If you have used up all the HBOS funding and you are not receiving cash from the maturing loans that you expected, how are you funding maturing debenture and interest payments? As loans are repaid, maturing debentures are repaid if not rolled over.



4 Responses to “Strategic Finance “intensively reviewing” its business”
andy hamilton Says:
June 23rd, 2008 at 2:47 pm
Hi Bernard
it is perhaps worth noting that HBOS (who, as you rightly point out, offered a $75m line of credit to Strategic) have found themselves in considerable recent difficulty in the UK; they are presently trying to get away an emergency Rights issue to raise capital off the back of a plunging share price. They are very, very exposed to the imploding UK housing market and are no doubt short of cash (and very keen to stop it leaching away judging by the way they have put up mortgage rates over there). One wonders what the thinking was behind offering a credit line to a company like Strategic (although it was instituted a while back). Maybe they want their cash back/ aren’t keen on Strategic spending it? If I were a betting man…………

I would be surprised if you get detailed answers to many of the questions you pose. By the way isn’t it amazing to read once again of a finance company which has such a high exposure to a single debtor. You have to shake your head at the business models some of these companies operate with.

Russ Says:
June 23rd, 2008 at 5:20 pm
It is not the “Hilton” that is funded - the hotel is “managed by Hilton”. Neville Mahine is the developer see http://www.timothy-terence-manning.com/hilton-fiji.html

Russ Says:
June 23rd, 2008 at 5:21 pm
Sorry - Neville Mahon http://www.google.com/search?hl=en&q=neville+mahon&btnG=Search

andy hamilton Says:
June 24th, 2008 at 8:52 am
This illustrates the trouble that HBOS are in:

http://news.bbc.co.uk/2/hi/business/7470122.stm

So they have used all their HBOS cash up already eh? No doubt HBOS will be first in line if anything goes wrong.

As an aside - a lot of NZ financial companies/individuals seem to have invested heavily in Fijian and other overseas holiday home/residential property. I predict that this sector will be in for a massive hit as the realization dawns that getting to these places is going to be so much more expensive in the future as peak oil bites. Long distance tourism is ultimately doomed in the era of ever rising fuel prices (something that NZ itself should be taking very seriously).

[Billy Boy]

REIHANA
Very well done :)
Clears up a lot of my questions
again Well Done
BB

[POSSUM THE CAT]

Billy Boy Chris Lee had some of his clients in Provincal

[Hoop]

Great Post Reihana :)

[Billy Boy]

Billy Boy Chris Lee had some of his clients in Provincal
Thats right !!! I have 4gotton about that !!
I like and get a lot of very good info from the www.interest.co.nz (http://www.interest.co.nz) sight.
Burnard Hickie's little talk is excellant.
By the way ..... Iron ore up 94% from ozzy to China :eek:
What about the inflation rocket now !!! :eek: Jezz !!
Maybe another thread...
I would like McDunk's thoughts on this doubling of price. :)
BB:)

[Dr_Who]

Very interesting interview.

They should do an interview with DPC.

[Reihana]

I've just walked into the office and been told by a colleague that the latest to strike trouble is St Laurence, withdrawing a prospectus and ceasing lending. Don't know if this is true or not; will seek verification.

[Hoop]

I've just walked into the office and been told by a colleague that the latest to strike trouble is St Laurence, withdrawing a prospectus and ceasing lending. Don't know if this is true or not; will seek verification.

Yep..it's true.

One of Chris Lee's A minus companies.:p

DPC will be sweating now. It's white knight has turned all black & blue.:eek:

This wave of better classed finance companes getting into trouble is a sure sign the NZ property sector is going to fall to bits methinks:(


Finance firm St Laurence to stop lending

12:45PM Tuesday June 24, 2008


http://media.apn.co.nz/webcontent/image/jpg/podmore_k160.jpg
Kevin Podmore
Finance companies in freefall (http://www.nzherald.co.nz/feature/index.cfm?c_id=1501786)


Finance charges 'first of many' (http://www.nzherald.co.nz/feature/story.cfm?c_id=1501786&objectid=10517955)
Dominion investors' tales of woe (http://www.nzherald.co.nz/feature/story.cfm?c_id=1501786&objectid=10517942)
Related nzherald links:


Auckland's $300m quarry development (Jun 6) (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10514657)
St Laurence reports $12m surplus (May 22) (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10511851)
The sorry list of finance company failures (http://www.nzherald.co.nz/feature/story.cfm?c_id=1501786&objectid=10517059&pnum=2)

Wellington-based finance company and property investment group St Laurence Ltd has today joined the list of troubled companies in that volatile industry.
The company, which has over NZ$340 million of assets and owes investors over NZ$250 million, has announced it has stopped lending and will withdraw its prospectus immediately.
In a statement, the company said:
"St Laurence Limited announced today that it has decided to exit from its money lending activities and is to withdraw its prospectus immediately. This decision results from rapid changes in the property lending markets affecting many financiers and investors."
St Laurence's majority owner Kevin Podmore said that although the company is not currently in default of its obligations under its Trust Deed, given the current environment, "there is considerable risk that it might do so in the future".
St Laurence said it had advised its trustee, Perpetual Trust Limited, of its intention to seek its debenture holders' approval for a 'scheme of repayment'.
It said it had commissioned an independent advisor's report so that details of the scheme can be sent out to investors in July.
Under the scheme debentures would be repaid on an instalment basis. Interest payments would continue.

- INTEREST.CO.NZ/NZPA

[Footsie]

IMHO

the only finance companies that will survive are SOuth Canterbury, Marac and UDC

that implies that Hannover, Strategic, Dominion, DPC, and whoever else is left will be gone before this property market bottoms......... which hold your breath folks.... might be a few years away


I know the industry well and I know their loan books. It's curtains for most if not all of the names above

hanover recently offering 15% in the herald... this is surely the death rattle.

[temuk]

Interesting to see the perpetual preference shares have crept down to 45 cents.

this may be good buying!

[Billy Boy]

NZF !!! Slipped under our radar
I dont know much about this lot.
Presumably they are in the s**t like the others
anybody ???
BB

[temuk]

In the timaru hearld today is an article saying the management is concideringbuying out the company.
the cheif executive would not give much detail.

[COLIN]

NZF !!! Slipped under our radar
I dont know much about this lot.
Presumably they are in the s**t like the others
anybody ???
BB

Dumped mine, at a significant loss.
According to Chris Lee they do have bank funding lines in place, thus not being so reliant on retail deposits, and they may be one of the survivors but I wasn't willing to take the chance.

[winner69]

Jock Hobbs passed away today .... achieved a lot in his short life .... RIP Jock

As the NBR says 'The Kiwi legend leaves a legacy both of rugby success and some loose financial strings in the business world still to be unraveled.'

Suppose many will still have a jaundiced view

[winner69]

Probably not the best choice of words by John Key about Hobbs “I join with all of them in celebrating his life and knowing that ours will be the poorer without him.”

Chalkie had a good piece on the demise of Strategic the other day ..... sound slike they were up to the roll them over every couple of months or so .... that way they were always new loans and never overdue

We'll never know whether Hobbs would have met the same fate as Sir Doug et all