PGC - Licenced to Bank

[Breastwork]

PGC antics best show in town
Last updated 05:00 07/05/2012
TIM HUNTER
Sometimes our base instincts cannot be denied - we humans have a perverse fascination with disaster that compels us to look even when we want to look away.
If you want proof, watch the film Jackass, particularly the enema long-jump stunt.
It has a mindboggling quality that has to be seen to be believed, just like the slow motion train wreck at Pyne Gould Corporation last week.
PGC ought to be a boring low- profile investment company with offices smelling of biros and old filing cabinets. But after 125 years of more or less conforming to type, it has started behaving like a hormonal teen and getting mixed up in all sorts of trouble.
Its latest mess involved the extraordinary resignation of auditor KPMG, announced to the stock exchange on Tuesday. KPMG's reasons were: "Unresolved differences as to whether certain transactions should be disclosed as related party transactions, and concerns over the adequacy of governance and management of financial reporting."
From an auditor this is nothing short of explosive, so much so that PGC ominously said it had "reserved its rights" in relation to the "untimely resignation".
The bizarre implication that PGC was thinking about suing its own auditor came less than a week after the sudden, unexpected resignation of PGC managing director John Duncan.
No reasons were given for the move, save for the euphemistic phrase that he had "decided to move on to new challenges", with immediate effect.
There is no suggestion Duncan has been involved in anything untoward, but it does imply an almighty bust-up at board level, most likely involving PGC director and majority shareholder George Kerr, who stepped into the breach as managing director.
Meanwhile, the Financial Markets Authority has said it is investigating related party transactions involving PGC, although exactly what they are has not been revealed.
Normally, investors would be running for the hills by now on the assumption that smoke means fire, but PGC shares dipped only a couple of cents to 32c, on minuscule volume, as shareholders stubbornly refused to budge.
The reason for this behaviour can be sheeted home to the ownership structure, because Kerr and his business partner, Baker Street Capital, own 76 per cent of PGC after the closure of their 37c a share takeover offer at the end of March. The standouts who refused to sell have presumably stuck their shares in a bottom drawer to await the day they become worth their underlying value, which was assessed by an independent appraiser last November at 49c-57c.
How long they will take to get there, if they ever do, is anyone's guess, although it can be said with some confidence that the current antics are not helping - it's pretty hard to see what accounting concessions could possibly be as bad as having your auditor resign in such high dudgeon.
Unless, come to think of it, the accounting concessions really are worse.
Last week it became apparent that some curious related party lending had been going on since Kerr and Baker Street's takeover offer went unconditional in mid- February.
The deals involved a private investment fund called the Torchlight Fund, a limited partnership structure in which PGC holds a 10 per cent stake as well as management control through the fund's general partner, Torchlight (GP) 1.
Torchlight owns a range of assets including property in the Queenstown Lakes area valued at about $35 million, acquired in 2010 from interests associated with local developer John Darby, a close business associate of George Kerr.
The other side of the related party deals involved Perpetual Trust, an investment management and corporate trustee business owned by PGC. The funds in Perpetual's stewardship are basically the savings of mum and dad investors.
On February 21, seven days after the takeover went unconditional, Perpetual Trust turned up in property records as mortgage lender on properties in the Queenstown and Wanaka area owned by subsidiaries of Torchlight (GP) 1. In one case it appeared to have acquired the mortgage from Australasian Credit Fund, another subsidiary of Torchlight (GP) 1. In another it appeared to have written a new mortgage.
Perpetual's mortgages initially had priority security for $21.6m, but this was increased in March to $30m.
If the Perpetual Mortgage Fund, the only Perpetual fund with a specific mandate for mortgage lending, made loans of anything like that sum the PGC board would have known about it - the fund's trust deed requires mortgages in excess of 5 per cent of the fund's value to be approved by the board of PGC.
The fund's value in September last year was $70m, so loans of more than $3.5m would qualify for direct board authorisation.
Why would Perpetual lend money to Torchlight? These days few investors worry about the answer - believing if it's a related party loan deal it's therefore bad news, period.
It remains to be seen whether these arrangements were material in the context of the dispute with KPMG, but they are enough to concern anyone invested with Perpetual.
In February, Perpetual changed the trust deed of its main mortgage fund to give it discretion over when and how much to redeem funds for anyone investing after February 10, as well as removing the right for investors to redeem by telephone.
This is all starting to ring alarm bells, particularly since PGC has been slow to provide reassurance that this isn't a dog's breakfast.
The few minority shareholders remaining on PGC's register are presumably all consenting adults who can cope with the eccentricities. But the impact on Perpetual, PGC's only actual operating business with $600m of client funds under advice or management, is another matter entirely.
It will be fascinating to see what happens next, but not necessarily in a good way.

[Balance]

Looks like Mr Tim Hunter (probably NZ's only true investigative journalist) is right on and on top of the related party issues with PGC.

Also, looks like Mr Kerr is so blind-sighted by the millions he lost buying his first 10% in PGC (over $4.50 per share - ouch!), he could end up destroying Perpetual and in turn, the value in PGC.

Oh well, Georgie boy, karma is one of those things you just have to get around to living with.

[Balance]

Looks like Mr Tim Hunter (probably NZ's only true investigative journalist) is right on and on top of the related party issues with PGC.

Also, looks like Mr Kerr is so blind-sighted by the millions he lost buying his first 10% in PGC (over $4.50 per share - ouch!), he could end up destroying Perpetual and in turn, the value in PGC.

Oh well, Georgie boy, karma is one of those things you just have to get around to living with.

The value destruction at PGC/Perpetual has begun and will accelerate as more and more investors pull their funds out of PGC and its managed funds.

http://www.nzherald.co.nz/business/n...ectid=10805172

Excerpt : "In its letter to investors, BNZ Private Bank said it normally gives 15 days notice of any changes to portfolios.

"However, in this instance we considered it to be in our clients' best interests to take immediate action," it said. "Therefore all funds held in the Perpetual Global Fund have been redeemed on May 8,

[Xerof]

"Instant Karma's gonna get you
Gonna look you right in the face
Better get yourself together darlin'
Join the human race
How in the world you gonna see
laughin' at fools like me
Who in the hell do you think you are
a super star
well, right you are...."

Lennon

[Under Surveillance]

The value destruction at PGC/Perpetual has begun and will accelerate as more and more investors pull their funds out of PGC and its managed funds.

http://www.nzherald.co.nz/business/n...ectid=10805172

Excerpt : "In its letter to investors, BNZ Private Bank said it normally gives 15 days notice of any changes to portfolios.

"However, in this instance we considered it to be in our clients' best interests to take immediate action," it said. "Therefore all funds held in the Perpetual Global Fund have been redeemed on May 8,

Implications include PGC having to root around to raise cash to fill funding holes in Perpetual? Might have to take what they can get for some of their PGW and/or HNZ shares?Death spiral?

[Grantas]

Apart from Rakon and PGC what companies does Bryan Mockridge have a role in?

[Balance]

http://investing.businessweek.com/re...le=RAKON%20LTD

He has been Chairman of the Board of Pyne Gould Corp. Ltd. since May 2011. He has been the Chairman of Perpetual Asset Management Limited since 2003 and also serves as its Director. .

Man who loves to wear a lot of hats!

The one that stands out is obviously Chairman of PAM Ltd as above. No wonder he is so defensive over the whole KPMG related party dispute!

[percy]

ACC is fully out ... Rats (no insult intended) leaving a sinking ship ... Odd sort of SSH message. Gives details of past dealings and simply informs they now have no holding whatsoever.

I didn't think once you got below 5% you had to report your dealings? So why is the ACC reporting? Or have I misunderstood the SSH notice entirely?

Is the ACC sending a warning to everyone that PGC is in serious trouble indeed?

Very clear message;out of PGC,big holding in HNZ.

[Xerof]

Belg, their last disclosure was at a 6% level, so they are obliged to disclose the change, which happens to now be zero for ACC, but the SSH notice ensnares one of the Blairs, who I guess has also bottled on this one

[Breastwork]

http://www.nbr.co.nz/article/pyne-go...itor-wb-119390

PwC covering their own arse?

PGC have an independant director?.....