I also would like to acknowledge all those who have made a contribution to the successful running of this House over the past 12 months. I wish them all the best for the festive season.
I do not have the humour of Darren Hughes, but I want to use this opportunity to discuss a very serious matter. Sadly, however, many thousands of New Zealanders will not enjoy the Christmas they might otherwise have had—those who have lost heavily in finance company collapses. In particular, I think of those mainly elderly investors in Strategic Finance who in the last 2 days have received letters advising them that they cannot rely on the undertakings that were made in the moratorium document, and, in particular, they cannot rely on receiving a payment on 7 January.
What concerns me, however, is that I believe that the accounts that were presented to the moratorium showed a misleading position and did not properly disclose the true quality of the company’s securities. The 2008 accounts clearly showed securities as being either first or second mortgages. Those are the accounts on which investors based their decision to vote in the moratorium. However, the most recent accounts of Strategic Finance to 30 June 2009 introduced a third category of security. In addition to first and second mortgages, we have a thing called a second mortgage with subordinated position. That is defined to be a second mortgage where the company participates with other lenders/investors, but the company’s position is subordinated to those lenders/investors.
The effect of this is real and substantial. Although the mortgage, on the face of it, may be a second mortgage, the substance is that the transaction is now a third-ranking security. And it is a substance that matters. I do not believe that the investors who voted in that moratorium last December knew that a significant number of strategic assets were third-ranking securities. To give members an example of such a transaction, I understand that, in respect of the Denarau Fiji project on which Strategic Finance has lent, approximately $30 million worth of priority investors in the second mortgage will need to be paid before the debenture-holders.
In disclosing this new, third category of securities, the accounts go back and restate what the figures actually were at June 2008. The accounts show for the first time the true picture as it was at 30 June 2008, and they show that some $68 million of mortgages that had previously been classified as second mortgages were indeed this third-ranking security.
I believe that those mainly elderly investors who voted at the moratorium would not have been aware that there was some $68 million in third-ranking securities. The directors have already written off $28 million of this figure, and I would not be surprised if the remaining balance, the full $68 million, was written off. What I see as just as bad is that no attempt has been made by Strategic Finance to comment on this reclassification of its accounts. There has been no attempt to comment on and inform investors that, in actual fact, $68 million of those securities at 30 June 2008 were, indeed, third-ranking, rather than second-ranking as they were purported to be.
I rang the auditors, KPMG, this morning, and inquired as to why they did not require disclosure of this information at 30 June 2008. I am yet to hear back from them. I would be interested to know also why they did not comment on it in their auditors’ report.
I accept that the directors are fully entitled to enter into securities that are effectively third-ranking; I only say that that information should have been properly disclosed to those investors before they voted on it in the moratorium. I believe that it was misinformation, and I believe that the time has now come for the Government to appoint a statutory manager. The Government needs to take control of this company so that investors can have confidence in the information they are given about these securities.
With that, I wish all members the best of the festive season. I am sorry that I have taken this opportunity to raise such
serious but, I think, very important matter. Thank you.
JOHN BOSCAWEN (ACT) : I seek leave to table an extract—page 81—from the Strategic Finance financial accounts for June 2008.
Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection.
Document, by leave, laid on the Table of the House.
JOHN BOSCAWEN: I seek leave to table page 54 of the Strategic Finance financial accounts for June 2009, in which the asset values of 2008 are actually restated.
Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is no objection.
Document, by leave, laid on the Table of the House.
JOHN BOSCAWEN: I seek leave to table, for the benefit of consistency, the full accounts for 2008 and 2009, so that those two documents can be read in context.
Mr SPEAKER: Leave is sought to table those documents. Is there any objection? There is no objection.
Documents, by leave, laid on the Table of the House