The contagion in the finance company sector in New Zealand is now chronic, with St Laurence the second of the major firms in a week to make plans to suspend payments to investors.
St Laurence yesterday said it has stopped lending, will withdraw its prospectus immediately, and will seek more time to make payments to investors via a "scheme of repayment".
The firm has about NZ$340 million in assets and owes about NZ$250 million to 9000 debenture and capital note holders,
Interest.co.nz reported.
In a statement yesterday St Laurence said that while the company was "not currently in default of its obligations under its Trust Deed, given the current environment, there is considerable risk it might be so in the future."
The firm is working on a scheme to repay investors' funds on an instalment basis, which may be spread over two to three years.
The proposed scheme will apply to St Laurence Ltd and not to holders of its debentures, bonds and mandatory convertible notes in St Laurence Property & Finance Limited.
Keith Podmore, the controlling shareholder in St Laurence, told the
New Zealand Herald that virtually all of St Laurence's loans were not performing.
"Even our very good loans, we're having issues about timing of repayments. Things have moved very quickly, and it did take us by surprise."
The newspaper quoted other, unnamed, observers arguing that the decline in the property market, and the inability of builders to sell dwellings at expected prices, was causing this latest wave of strife in the finance company sector, rather than the fall in reinvestment rates.
Dominion Finance last week said it was considering a moratorium on payments to debenture holders.
About half of the NZ$160 million loan book in arrears and investor reinvestment rates fell to below 20 per cent from 64 per cent in March, the
Dominion Post reported.
Meanwhile Strategic Finance, New Zealand's fourth-largest finance firm and a subsidiary of Allco Finance Group, has started talks about a sale,
Interest.co.nz reported.
Strategic said it has used up all its recent NZ$75 million of bank funding from HBOS but remains confident that it can repay debentures as they mature and make all its interest payments.
Chief executive Kerry Finnigan told Interest.co.nz a total of NZ$280 million worth of loans were due for repayments over July, August and September, while maturing debentures were worth NZ$15 to NZ$20 million a month.