Slow process for return of Vision Securities' investors' guaranteed deposits

Frustrated investors in government guaranteed failed finance company Vision Securities will be paid interest on their investments beyond the date of the company’s March 31 receivership.

However, just when the 953 depositors who are owed NZ$28 million will get their money back, or even confirmation of exactly what they’re entitled to, remains unclear.

One investor in the retirement home finance company, speaking on condition of anonymity, told interest.co.nz this week the whole process was vague and frustrating. Given the small number of investors and relative simplicity of Vision Securities, he questioned how Treasury would cope if a much bigger finance company, that was also party to the Crown Retail Deposit Guarantee Scheme, collapsed. Treasury has said in the past it aims to repay investors as soon as possible. More info here.

Vision Securities was placed in receivership by trustee Perpetual Trust at its directors’ request after the failed settlement of a mortgaged property on March 26. The settlement of that loan was expected to generate about NZ$6.75 million and its failure to do so led to concerns about the firm's liquidity and ability to meet payments to debenture holders.

Rod Pardington and David Levin of Deloitte were appointed receivers on March 31. Investors were then told they would be sent a letter by Treasury in mid-May to start the claims process.

But Treasury has since advised that this letter is now unlikely to be sent until mid-June. Spokesman Angus Barclay said Treasury officials were waiting to receive details from the receivers before they could send the letter out. What they need is investors’ names, contact details and the terms of their debentures, - effectively how much investors' are owed. The time taken to audit and confirm how much is owed to each Vision Securities debentureholder was taking a bit longer than expected.

“From our point of view, we’re ready to go,” Barclay said. “You need to talk to the receivers.”

The receivers, via a Deloitte spokesman, said they were acting in accordance with their reporting timeframe obligations. A report would be lodged with the Companies Office by mid-June.

Matthew Lancaster, head of corporate trust at Perpetual Trust, said his understanding was there was a registry issue that was delaying the repayment process. This was something the receiver and Treasury were dealing with so everything he had heard was via them.

Investors' are also concerned about how much interest they'll be repaid. That's because Treasury's website had noted whether or not they were eligible to be repaid interest after the date of Vision Securities' default depended on interpretation of the company's Trust Deed. Lancaster said, however, Treasury had accepted that interest on deposits would keep accruing until the date principal is repaid, IE beyond the date of the firm's receivership.

“In which case the delay in dealing with it is more annoying than costly,” Lancaster added.

The Vision Securities investor who contacted interest.co.nz pointed out this was an important issue. Although he had been receiving quarterly interest payments on his investment, he was aware of other investors who had elected to wait until their investments matured before being paid interest.

Treasury has so far paid out NZ$69.7 million to investors in Crown guaranteed firms that have failed. As of its last annual balance date on June 30, 2009, Treasury had received NZ$228 million in fees from companies participating in the scheme that was introduced by then-Finance Minister Michael Cullen on October 12, 2008. That includes NZ$74 million collected in guarantee fees plus another NZ$154 million paid in advance by firms to cover future participation in the scheme.

 This article was first published yesterday in our paid subscriber email for bank executives, regulators and other industry experts. Subscribe here or email bernard.hickey@interest.co.nz