Dorchester advises details of 3 year Repayment Plan for Debenture Stockholders and Noteholders
26 November 2008
Dorchester Pacific has announced details of the Deferred Repayment Plan for Dorchester Finance investors. Investors will vote on the plan on 17 December 2008.
Under the Plan, Secured Debenture Stockholders would be repaid their $164 million principal in 12 payments over 3 years with an initial payment of 20% prior to Christmas, followed by 10 quarterly payments of between 5% and 7.5% and a final payment of 17.5% on 30 September 2011. Unsecured Noteholders owed $8m would be repaid in two instalments with an initial payment of 10% prior to Christmas and a final payment of 90% on 30 September 2011.
No accrued or future interest would be payable to investors but secured Debenture Stockholders would participate in a profit share payment of 50% at the end of the 3 years.
Details of the Plan will be mailed to investors on 30 November 2008 and a number of Investor Roadshows will be held around the country between the 6 and 12 December before the meeting to vote on the Plan to be held in Auckland on 17 December 2008.
If the Deferred Repayment Plan is approved PricewaterhouseCoopers will be appointed Monitoring Manager to monitor progress over the 3 year term of the Plan.
Chairman, Barry Graham commented: “We appreciate that the delay in finalising the Deferred Repayment Plan has been frustrating for investors. But the time taken has been very well spent in consulting and working closely with the Trustees and with a number of expert independent advisors. So, we are especially pleased that we have been able to finalise the Plan in time for a vote and the prospect of an initial payment prior to Christmas.
“The outcome contemplated by the Plan is dependent on the performance of and volatility in the economy, particularly in the property market.
“The Board considers that the Plan provides benefits and options which would not be available under a receivership or in a liquidation. Under the plan the business will continue to operate as a going concern. Key management will be able to be retained and loans will be able to be realised in an orderly way. This would give the Dorchester Group the time needed to restructure its balance sheet, raise new equity, secure wholesale funding lines, and participate in any industry consolidation that may eventuate within the finance sector.”
Executive Director, Paul Byrnes commented: “The focus of the Plan is to return principal to investors as quickly as possible. The business will continue to operate as a going concern but on a much reduced scale. No new lending on property will be undertaken over the term of the Plan. Consumer lending will be restricted under lending covenants in the Plan and will also be subject to a new Lending and Credit Policy recently developed and supplied to the Trustees. In developing the Plan a no-new-lending option was modelled but the Board believes that a no-new-lending scenario is simply not viable.
“Staff numbers within the Dorchester Group have been reduced by approximately 30 over the last few months and a significantly lower salary, wages and overhead cost base has been achieved. The executive team has been reduced from 6 to 2. Further work is continuing on simplifying the structure of the organisation with the objective of minimising overheads and operating expenses.”
Mr Byrnes noted that “while restructuring of the business and development of the Deferred Repayment Plan over the last 3 months has been hugely time consuming our focus and priority has remained on management of receivables and the company’s cash position. Despite the deteriorating market we have managed to exceed our cash position projections. This has enabled us to increase the first repayment of principal from an originally proposed 15% to 20% of principal for secured Debenture Stockholders.
“Realisation of the property loan book is where the biggest uncertainty lies. The advantage of the Deferred Repayment Plan is that it will allow time for an orderly realisation of these assets. The alternative of a receivership is unlikely to maximise return for investors. Forced sales and the stigma of receivership, and its effect on counter party behaviour, would likely lead to lower realisations than under the Deferred Repayment Plan.
“The Board believes that in the current economic circumstances the Deferred Repayment Plan would provide a materially better outcome than the alternative of receivership or liquidation.”
ENDS
For further information:
Click here to view a full copy of the Deferred Repayment Plan Investor Pack and meeting papers
For more information, please contact:
Paul Byrnes
Executive Director, Dorchester
Tel: (09) 308 4950, Mobile: 021 644 441
Barry Graham
Chairman, Dorchester
Tel: 0274 723 810