Guardian Mortgage Fund makes NZ$23.8 mln provision for 19 loans; sees 5c loss

Guardian Trust said it had created provisions of NZ$23.8 million for its Guardian Mortgage Fund and that this could reduce investors' final payouts by up to 5 cents in the dollar once the fund is wound up in 2013. The provision is made up of 19 loans in total. The Guardian Mortgage Fund was frozen in July 2008, with NZ$249 million owed to around 3,700 investors. The fund has so far returned 25% to investors and announced last week it had enough cash to make another repayment of 10% in September, followed by a likely repayment of 5% at the end of the year. Investors voted for the wind up of the fund in February this year. "Based on recent market experience we have created provisions of NZ$23.8m and shown this as a reduction in the holding value of the loans and interest receivable in the Fund," a Guardian Trust spokesman said. "It should be recognised that these are not losses, but prudent provisions against potential losses based on current market experience. It should also be noted that we have not taken into account income the Fund will continue to receive from loans which would offset any losses we may experience," he said. "Based on today's market and our estimate of interest income over the period to wind-up, the Fund may incur a small loss, in the region of 5 cents per dollar, although this may change over time depending on whether market conditions improve or deteriorate further." "The Fund is targeted to be wound up by 31 March 2013. In order to achieve this, the balance of the mortgage loan portfolio at that time will be sold. Specific realisation provisions are based on the expected selling costs and discount of loan values that will be incurred in selling the balance of the mortgage portfolio to a third party." The 19 loans against which Guardian Trust had raised provisions were "geographically spread and spread across different sectors," the spokesman said. The fund's loan book was made up of 74 rural loans worth NZ$64 million; 54 commercial loans worth NZ$77.6 million; and 58 residential loans worth NZ$13.9 million. Regionally, 51.4% of the fund's loans were in the Central region; 20.8% in the Northern region; and 27.7% in the Southern region.