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16th finance failure as mfs boston hits wall

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    16th finance failure as MFS Boston hits the wall

    Finance failure

    MFS Boston became the 16th finance company in under two years to go to the wall when it called for a moratorium on loan repayments.

    Nearly $2 billion has been invested in the 16 companies, some of which has been repaid by the receivers of some of the companies.

    Chronology of company failures:

    * May 2006: National Finance 2000. The company held deposits of $25.5m on behalf of 2026 investors, and had made loans totalling $27.3m to 3765 individuals or companies.

    In March this year, receiver said secured investors had received back 40c in the dollar at that stage.

    * June 2006: Provincial Finance. Receivership seen as best way to protect the interests of debenture stock holders, who had invested $300m with Provincial.

    Last month secured debenture holders received a further return of 7.5c in the dollar bringing the total returned to 65c per dollar invested, or $192 million.

    * August 2006: Tauranga-based finance company Western Bay, owing more than $48m to investors and having lent $53m in around 10,000 of loans.

    In December receivers announced a second payment to debenture holders, estimating an eventual recovery of 81c to 82c in the dollar.

    * July 2. 2007: Specialist property financier Bridgecorp, after defaulting on repayments of some term investments due to investors -- owing about $500m to 18,000 investors.

    Late in July, investors were told they could receive anything between 25c and 74c for each dollar invested, with the wide range partly due to complex offshore investments. Receivers said at June 30, Bridgecorp's had 69 loans totalling $393m, with many of the better quality loans sold off.

    * August 21, 2007: Nathans Finance, owing $166m to around 6000 investors. Nathans was a wholly owned subsidiary of vending technology company VTL Group Ltd which the day before the receivership announced it was insolvent due to a Companies Office investigation of Nathans.

    * August 29, 2007: Property Finance, which has debentures of over $80m and loans of over $630m. It reported it was in deep trouble and unlikely to be able to honour its debts.

    * August 30, 2007: Five Star Consumer Finance, with receivers PriceWaterhouseCoopers (PWC) saying big loans in its $51m lending book were "outside normal lending practices". It said lenders may get as little as 26-40 percent of their money back. Prospectus showed it owed $57.6m at March 31, 2006, in various dated debentures and had lent out $68.7m.

    * September 4, 2007: LDC Finance Ltd trustee Perpetual Trust calls in PWC as receivers. The company has 995 depositors and debenture holders owed $19.3m, and assets of $23.8m.

    * September 5, 2007: Nelson-based car finance firm Finance and Investments was placed in receivership with PWC by principals Andrew Harding and Murray Scholfield, owing 370 investors $16 million. Finance and Investments received funding from LDC.

    * October 4, 2007: BDO Spicers appointed receivers to Auckland-based financier Clegg and Co Finance. Clegg had around $15m of 500 investors' funds in debentures. Covenant Trustees said Clegg's trust deed had been breached to a "significant extent". The breach of a related party loan meant Clegg had minimal, if any, residual shareholders funds.

    * October 8, 2007: Auckland-based Beneficial Finance secures agreement from debenture holders for a moratorium on debenture payments. The loan book totalled $31m at the end of March, primarily advancing hire purchase and consumer credit to individuals and some businesses.

    * October 16, 2007: Geneva Finance stopped taking deposits and put a moratorium on repaying debentures until April 2008. The company is dependent on a $50m credit line from the Bank of Scotland. Geneva owes about 3000 creditors over $138 million.

    * November 29, 2007: Capital + Merchant Investments placed in receivership. Capital+Merchant Finance and Capital + Merchant Investments, breached general security agreements with Australian company Fortress Credit Corp. Capital + Merchant owes investors $190m. Receivers Grant Thornton said investors were unlikely to get more than 59 percent of their investments back.

    * December, 2007: Numeria Finance when into receivership with 480 debenture holders owed $6.7m. In February, debenture holders were told they can currently expect a return of 38c to 51c in the dollar for their investment.

    * Feb 1, 2008: MFS Pacific Finance, a unit of publicly-listed MFS New Zealand, announced it had defaulted on loan repayments after its Queensland-based parent, MFS Ltd, said it would not provide further support. MFS Pacific holds more than $325m invested by 12,000 New Zealanders. Trustee Perpetual said the company was not yet in receivership. On February 27 it said it needed more time to assess its position.

    * Feb 27, 2008: MFS Boston, indirectly owned by MFS Ltd (see above) is asking its debenture holders on a 20-month wind-down to stop it going to receivers, Its 1700 investors are owned $42m. While the company has not defaulted, director Kingsley Turner said the firm foresaw a gap between loan repayments and debenture maturies. It said it was confident investors would eventually be repaid their money plus interest owed.
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