Finance and Leasing Firm Breaching Reserve Bank Rules Placed in Receivership
Deloitte has been appointed receivers to an ailing finance and leasing firm in New Zealand when it failed to meet the capital ratio rules of the Reserve Bank within the required period.
Finance & Leasing Ltd. has 47 percent of the total value of its loans in the property sector, according to its direcor Kipp Alexander. He said the finance and leasing firm stood solvent all throughout the global financial crisis, but finding the 12 months given to comply with new regulations requiring the firm to run down loans in the property sector an arduous task, Finance & Leasing had to go into receivership to repay its 227 investors.
The finance and leasing firm already had a prospectus extension, but the Companies Officer could not give its approval to it because the firm failed to comply with capital ratio requirements in the time specified. It has 227 debenture holders amounting to $17 million in total investments, but which the Crown retail deposit guarantee scheme did not cover.
Prior to the implementation of the new regulations in December 2011, the finance and leasing firm already had $1.2 million in the bank and a credit line, with receivables totaling $20 million. Its business model for 25 years was designed to accommodate small number of loans, with the value of each loan being higher.
“Today this may not be the preferred model but we believe it will lead to a high recovery rate, particularly since almost all of our loans are backed by first mortgages or first secured chattel type loans all with no more than three year terms,” Alexander said.
Alexander said the finance and leasing company could have continued with running down its loan book amid tough market for property developments but the very limited time provided by the state crippled its efforts.