Business and finance briefs: Bank settlements limit Crown deficit; Crafar sale probed; OPI outlook grim

1. Bank settlements with IRD limit Crown deficit The Government delivered an operating deficit before gains and losses of NZ$5.27 billion in the nine months to March, NZ$522 million - or 9% - less than expected, largely thanks to about NZ$400 million worth of one-off revenue from settlement of the banks' structured finance disputes with IRD. Excluding one-off items, underlying tax revenue was about NZ$930 million, or 2.4%, lower than forecast. Core Crown expenses were NZ$809 million, or 1.7%, lower than forecast due to NZ$385 million worth of Treaty of Waitangi settlements being delayed to the next financial year. 2. OIO investigates Crafer sale The Overseas Investment Office says it has has launched an investigation into the purchases of four farms previously owned by Crafar family interests saying an application for consent for the purchases by companies associated with May Wang hadn't been received.

The purpose of the investigation is to obtain detailed information about the purchases by UBNZ Assets Holdings Limited and UBNZ Funds Management Limited. “We have launched the investigation as an application for consent for the purchases of the farms has not been received,” said Annelies McClure, Manager of the Overseas Investment Office. Investigation of the land titles register reveals UBNZ Funds Management Limited purchased two farms on 11 February 2010, one near Norsewood and the other in Waitotara. The register also reveals the purchase of two further farms in the Manawatu on 15 February 2010. Once purchased by UBNZ Funds Management Limited, the farms were immediately transferred to UBNZ Assets Holdings Limited. Under the Overseas Investment Act 2005, consent from the OIO is required by overseas persons and associates of overseas persons who intend to purchase sensitive New Zealand land. The land in question is considered to be sensitive land under the Act. “Part of the investigation will involve the OIO establishing whether a breach of the Act has been committed,” said Ms McClure. “It is an offence for an overseas person or an associate of an overseas person to buy sensitive land without consent and significant penalties apply.” The Office expects the investigation to take several months to complete due to the complexity of the transactions and the need to source and thoroughly analyse the information.

3. Grim outlook remains for OPI investors OPI Pacific Finance's receivers say they can't estimate either how much or when the collapsed finance company's secured debenture holders might receive any dividends. In a letter to investors this week receiver Colin McCloy of PricewaterhouseCoopers reiterated secured debenture holders in the company, formerly MFS Pacific Finance,were facing a significant shortfall and there would not be enough money to pay a dividend to unsecured note holders. OPI was placed in receivership by Perpetual Trust on September 15, 2009. That ended a moratorium that was in place from May 2008. During the moratorium secured debenture holders were repaid 22.17 cents in the dollar but unsecured note holders received nothing. The balance owed to OPI’s secured debenture holders is about NZ$200.1 million and unsecured note holders are owed NZ$56.7 million.

The estimated return of future dividends to secured debenture holders will be driven by recovery from the following assets and/or claims: The loan book from borrowers and/or guarantors; Potential claims against valuers and the insurer; Claims in the liquidations of Octaviar Limited (“Octaviar”) and Octaviar Administration Pty Limited (“OCVA”); and Potential claims against directors and third parties. Due to the complexity of the receivership, the various claims being pursued and the investigations being carried out by the receivers, it is extremely difficult to estimate the return to secured debenture holders from the receivership of OPI. Accordingly, we regret to advise that an estimate of future dividends or the timing of dividends to secured debenture holders cannot be provided at this time. We appreciate this is a difficult time for investors and thank you for your support while we continue to work through the claims and continue our investigations into the affairs of OPI.

This was first published this morning in our Daily Banking and Finance newsletter, which is for our paying subscribers. Find out more here.