Dollar

Receiver Fights A Battle At Hastings

29 September 2008

INVESTORS who have about $40 million tied up in Hastings Capital could receive as little as 55c to 65c in the dollar back, the firm's receiver has said.

That estimate depends on the receiver's ability to sell property developments in which the Manly finance company had invested, a process expected to be difficult, which could take up to two years.

The developments are now worth less than half of their most recent valuation, the receiver said in a report published late last week.

Hastings Capital is the latest in a string of high-risk debenture finance companies to have had their business models almost torn apart by softening property values and high interest rates.

The firm issued debentures to investors whose funds it then lent to developers.

The company's trustee appointed the receiver in late August when Hastings could not repair its capital position after a 90-day warning.

Many of the 2000-odd debenture holders relied on interest payments from the fund to afford daily needs. By Christmas they are likely to receive 7c in the dollar, the receiver, McGrathNicol, said.

Mark Kovac, the former managing director of Hastings, has been fighting the appointment of a receiver and said the company could trade its way out of difficulty. But revised valuations of the loans made by Hastings to property developers underline the sketchy state of its finances. More than 70 per cent by value of the loan portfolio - or six of eight loans - was overdue for repayment last week.

"All underlying secured properties have reduced in value from the previous valuations prepared for the group (consistent with an overall weakening in the domestic property market)," Joseph Hayes, of McGrathNicol, wrote.

"When considered on an overall basis, the underlying secured properties have been valued at 55 per cent below the values ascribed to them in previous valuations prepared for the Group." Mr Hayes said he expected "lengthy delays" in the sale of many of the properties and only one of the eight had presale contracts lined up.

The receiver expects to issue a full report by mid-October, including a better estimate of the distributions to debenture holders and options available to debenture holders.

Mr Kovac is trying to convene a meeting of trustees to remove the receiver. The trustees and receiver have warned about the cost of a meeting and emphasised the importance of investors knowing the state of the group's finances. Mr Kovac did not return the Herald's calls.

Back to News Index | Back to Home