Published 16 June 2011
The Financial Markets Authority has made an interim order to stop allotment of securities by GFNZ Group Ltd (ex-Geneva Finance Ltd). This is a new power, and chief executive Sean Hughes said yesterday it was the first time the authority had exercised it.
GFNZ said when it released its financial results for the March year on Tuesday, it was in breach of one covenant under its facility from BOSIAL (Bank of Scotland International (Australia) Ltd), the “minimum new lending” covenant: “The lending covenant was developed as a measure of the sustainability of medium/long-term profitability forecasts rather than a substantive measure of BOSIAL’s security position.
“As at 31 March 2011, the group was $0.4 million (1.9% or about 32 loans) short of the required lending level under this covenant. Compliance with this covenant could have been achieved had the board been prepared to lower its asset quality standards. The board was not prepared to compromise asset quality. A waiver of this breach has been requested. The March 2011 unaudited accounts have been prepared on the basis that the group is successful in obtaining this waiver.”
The Financial Markets Authority said yesterday the facility was repayable on demand as a result of the breach. “GFNZ is a finance company operating under moratorium and its shares are listed on the NZX. Many former debt holders are now shareholders as a result of a debt-for-equity swap in March 2011. GFNZ is a continuous issuer and was raising money from the public through its registered prospectus dated 12 May. “We believe our action is in the public interest because the prospectus relates to a continuous offer of debt securities. It is vital that existing & prospective investors have sufficient information about the company to make an informed assessment of their investments.
“The interim order will prohibit any further allotment and so protect investors from being misled. Our first use of this new stop order power is one means by which we can improve investor confidence in the accuracy of information presented to the market.” Mr Hughes said the authority was seeking further information from GFNZ while it considered whether it should use its power to order the offer documents to be corrected to its satisfaction or cancelled on the grounds that they are likely to deceive, mislead or confuse investors.
31 March 2011: Geneva wins support to convert notes & debentures
3 February 2011: Geneva makes early moratorium repayment
15 December 2010: Geneva reduces loss on 43% less revenue
8 October 2010: Geneva tops $100 million in post-moratorium repayments
13 June 2010: Geneva cuts loss, brings September payments forward
1 February 2010: BOSIAL tells Geneva full funding unlikely to be extended
15 June 2008: Geneva reports $7.9 million loss, backing slips to 34.7c
15 April 2008: Geneva Finance puts reconstruction to investors
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Attribution: Authority release, story written by Bob Dey for the Bob Dey Property Report.