Strategic Finance Chief Executive Kerry Finnigan is confident his property finance company will survive the fallout from the New Zealand property sector's own Credit Crunch with the help of its new core shareholder HBOS International (Halifax Bank of Scotland).
Strategic's managers have finalized a planned buyout from current owners Allco Hit, but need debenture and note holders to vote for a delayed repayment process for the deal to go through. "I'm very positive about this business and am confident about its future and long term survival," Finnigan told interest.co.nz in an interview.
"We have an obligation to our investors to make sure it's (the recovery) locked in. We don't want to be leaving them high and dry," he said. The involvement of HBOS in the buyout and its committment to increase its bank funding line by 50% to NZ$150 million was a "huge step" for the company.
"At the end of the day there's going to be 3-4 players specializing in the property finance market and those players require shareholders with strong capital backing," Finnigan said.
The survivors would also need to comply with the proposed regulation requiring much more rigor in governance and lending processes, he said.
Finnigan said Strategic's auditors KPMG and advisors Korda Mentha had been very diligent in assessing the level of impaired assets (over 50%) reported in the annual accounts.
No valuation old than 3 months was accepted in the audit in the absence of current valuations reliance was placed on existing valuations and other third party evidence and where concerns existed blanket provisioning was required, he said.
"The current environment has got everyone quite nervous," he said.
Projects had seen problems where buyers of properties were struggling to find finance to settle their purchase obligations, the first time settlement risk had become an issue.
However, Finnigan said he was seeing some signs of recovery. "For the first time we're starting to see some activity. We're seeing some signs that people are seeing these prices as pretty good buying," he said. Some valuations of the loans for projects had been below the replacement value of the project and some put no value on the land, he said.
"Fundamentally, that doesn't make sense," he said.
Strategic believed it could recover against the provisions made in the annual accounts and this would be a focus for the next 12 months.
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