Securities Commission and Perpetual warn Strategic investors against Marchmont bid

The Securities Commission and Perpetual Trust have urged Strategic Finance investors to seek professional advice before accepting an "opportunistic" offer from Marchmont Securities Trust of 10 cents in the dollar for NZ$5 million of Strategic Finance debentures. About 12,800 retail investors are owed NZ$290 million by Strategic Finance, which is in moratorium and has defaulted on its first scheduled payment of 3 cents in the dollar earlier this month. "Offers to buy securities for a fraction of their face value can be opportunistic, and play on doubts about the value of the debentures," said Commission Chairman Jane Diplock said in a statement. "The debentures are not trading on any organised market, so there is no market price against which investors can assess the offer," she said. "The fact that someone is willing to pay 10c in the dollar does not mean that this is the true value of the securities. We urge investors to seek advice from a reputable financial adviser." Diplock said the offer was not illegal under securities legislation, but any offer must not be misleading or deceptive. Perpetual Trust, the trustee for Strategic Finance, said the Marchmont offer appeared opportunistic and under-valued the amount investors could otherwise receive. We believe the offer takes advantage of the present uncertainties that exist concerning Strategic's future, and may seriously undervalue the amount that investors could otherwise receive from Strategic, Perpetual Trust's head of corporate trust business Matthew Lancaster said in a statement. Despite the uncertainties that currently exist concerning Strategic's future and the amount that its assets will realise, Perpetual considers that the Marchmont offer is likely to seriously undervalue the amount of each investor's investment in Strategic," Lancaster said. "Investors should not accept the offer until they have obtained financial advice from their financial adviser, accountant or solicitor, in the light of their present circumstances and position, Mr Lancaster said today. Mid way through January,  Strategic announced a further NZ$106 million in provisions and bad debts for the half year to December 31, triggering a second review event with its trustee. Strategic announced it expected to make a net loss of NZ$84 million in the six months to December 31. Strategic triggered its first review event under the moratorium when it failed to make a promised payment to investors on January 7.