Saturday, April 12, 2008

Moratorium out; receivership in

I read an interesting article the other day in which the writer argued that receivership, as opposed to a moratorium on repayments to debenture holders, is preferable when a finance company runs into "funding problems".

Louise Edwards, chief executive of trustee Perpetual Trust, evidently agrees in the case of Lombard Finance and Investments Ltd, one of the latest casualties of the credit crisis.

Last week, when Lombard Finance's lending problems in the property market were revealed, a "freeze" was sought on its repayments. But this week, Ms Edwards said that, after a review of the proposed moratorium, the conclusion reached was that a receivership was in the best interests of investors in Lombard.

Information supplied by the company indicated Lombard Finance had $127 million of debenture stock and notes on behalf of about 4400 investors, with a loan book of about $137 million.

Financial adviser Chris Lee said investors could expect to receive 30c to 40c in the dollar.


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