Vision Securities in receivership

Another NZ finance company - Vision Securities - was put under receivership last week, leaving the government to meet its obligations towards depositors covered under the New Zealand government retail deposit guarantee scheme.

This is the third finance company covered by the retail deposit guarantee that has failed.  Vision Securities has around 1000 depositors who are owed about NZ$30 million.

Among the previous two failed companies, Mascot Finance depositors were owed about NZ$68.5 million and Strata Finance holders were due NZ$448,000.

The NZ government hasn't released details of how much it has actually paid out to Mascot and Strata holders but it is estimated the total amount will not exceed NZ$35 million.

In its latest financial statements, the government reduced provision for guarantees under the retail deposit scheme to NZ$771 million from NZ$776 million after making a significant cut of NZ$123 million in December 2009.

Vision's failure leaves one wondering about the merit of the B rating with negative outlook assigned to the company by Standard  & Poor's as recently as 22 February 2010. A B rating has a one in five chance of default over five years, compared to say a CCC rating which has a one in two probability of default.

Following the move to receivership, S&P was quick to downgrade the rating to the D category indicating a default.