Gould Wealth Management (GWM) and its Investment Committee have reviewed the St Laurence Limited (SLL) Recapitalisation Plan (the Plan) and a report on the plan prepared by Price Waterhouse Coopers (PWC).
Since receiving the Plan the Investment Committee has sought clarity and further information from Kevin Podmore, the Managing Director of St Laurence, PWC, the Trustee, Perpetual Trust and other sources. The Plan is complex, has a long time frame, and makes a large number of assumptions which create a high level of uncertainty as to the eventual outcome.
The PWC report notes this uncertainty and as such gives little guidance as to the best course of action for investors. Neither PWC nor Perpetual Trust makes any recommendation as to whether investors should accept or reject the Plan. The GWM Investment Committee has therefore tasked itself to determine on your behalf whether it is in your best interests to vote for or against the Plan.
The Plan is not a moratorium such as that which we have seen with other finance companies where there is just an orderly realisation of the loan book. For two reasons the Plan requires the on-going operation of SLL.
Firstly, as with other similar situations, SLL is of the opinion that it is better placed to work out and extract value from the SLL loan book than a receiver. The second reason is because SLL is not just a finance company but also has significant business as a “fund manager” and in particular holds management contracts for two property owing entities being The National Property Trust and St Laurence Property and Finance Limited. These two management contracts are of significant value and provide significant revenue to SLL, both of which would be used by SLL to repay investors.
The alternative to the Plan is to appoint a receiver. The PWC report notes that a receivership is likely to produce a lower return for investors but should provide any returns sooner. Given the current uncertain state of the property and lending market all return assumptions are fraught with uncertainty. One of the key aspects of the plan in this respect is that it buys time to realise all assets.
In the end the decision comes down to either supporting the incumbent management by giving them time to realise value for investors or to appoint a receiver. Our Investment Committee has reached a preliminary view which is to support the Plan on the basis that it offers an opportunity for better returns for investors.
However the Investment Committee notes that in event that returns do not materialise in due course it may become desirable to appoint a receiver in the future. The Investment Committee is seeking clarification on this point from the Trustee and is also seeking further comment from PWC on their report. As such we are not in a position to give you our final recommendation at this point in time. We propose to continue our deliberations. Once we have reached a final conclusion we will communicate this to you and vote accordingly on your behalf.
If you would prefer to vote personally then please contact your local office on 0508 837 827 or email enquire@gouldwealth.co.nz and we will send your voting papers and the proposal document to you immediately.
Please contact your adviser if you would like any further information
10 November 2008
St Laurence Limited Recapitalisation Plan
We received notification today advising that St Laurence's Recapitalisation Plan has been approved by the trustee. St Laurence are currently printing the necessary documents for distribution. As soon as we receive the details we will assess the Plan and then send you all the necessary documentation along with our recommendation.
St Laurence are holding a nationwide series of
seminars from the 17th of November to discuss the Plan, while it is short notice we would advise that you attend to hear the details directly from Kevin Podmore.
Key Dates
- Documents mailed to investors: Friday 14 November (correction - all clients have been mailed 21/11/08)
- Informal investor meetings: 17 – 27 November
- Proxy/voting forms to be returned: no later than 10am, Wednesday 3 December 2008
- Formal voting meetings: 10am Friday 5 December 2008, in Wellington
Key Information
Prior Updates
17th September 2008
The St Laurence Proposal has been delayed by approximately 1 month. The mailing date for all material is now expected to be mid-October with a meeting to present the proposal and hold a formal vote due for mid-November. Please
click here for the complete letter from St Laurence.
8 August 2008
A number of advisers have attended the St Laurence meetings around New Zealand. The feedback we have received is that Kevin Podmore's presentation has provided clarity for investors in regard to:
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The position of St Laurence as a business
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Why the decision to withdraw the prospectus was made
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Kevin's assessment of the relative returns an investor is likely to receive in a receivership vs a managed wind down of the book
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The shareholders pledge to put an additional $30m of assets into the business
We are expecting to receive details of the St Laurence proposal in mid-September.
11 July 2008
St Laurence Limited announced on 24 June 2008 that it will cease its money lending activities and immediately withdraw its prospectus due to the rapid changes in the property lending markets which continue to affect many financiers and investors.
St Laurence have stated that they have made this announcement as a proactive measure to ensure that they do not find themselves unable to make repayments at a later date. By informing the market at an early stage and seeking to enter into an arrangement St Laurence is working to ensure that all investors are treated equally.
Although the company is not currently in default of its obligations under its Trust Deed, given the current environment, Kevin Podmore, Managing Director of St Laurence, has stated that he believes there is considerable risk that it might do so in the future. St Laurence intends to hold a meeting to propose a scheme for repayment to investors in early August.
St Laurence Limited has advised its trustee, Perpetual Trust Limited, of its intention to seek its debenture holders’ approval for a scheme of repayment and for that purpose, it has commissioned an independent advisor’s report to review the details of the scheme.
The scheme will be a proposal to repay the principal amount of debenture stock outstanding on an instalment basis. The St Laurence board believes that this is the most prudent course of action to protect investors’ funds as it exits its lending operations. Debenture holders will continue to receive interest until they have been repaid in full.
While the details are still to be finalised Kevin Podmore said he expected the repayment scheme to be over a 3-4 year period with instalments made throughout that period which would include capital and accrued interest.
While the St Laurence announcement is not good news for investors it is indicative of the approach of St Laurence that they have acted well in advance of any shortfall in ability to pay maturing investors and not sought to ride their luck in the current financial conditions.
Previously the major problem that has affected finance companies has been the fall in reinvestment rates as wary investors have moved away from the sector, however now many industry commentators are pointing to the rapidly worsening condition of the property market as the main driver for companies such as St Laurence being forced to withdraw their prospectuses.
St Laurence have a series of Client meetings planned throughout July and early August, we recommend you attend your local meeting to get the most up to date information from the St Laurence team. Please click on the following link for the full details.
We are seeking further information on the proposed repayment scheme and will provide an update to affected clients as soon as more details are available.
