Finance and Leasing placed in receivership owing $17M

Finance and Leasing first finance company to fall foul of tougher regulations

By Paul McBeth

Jan. 20 (BusinessDesk) – Finance and Leasing Ltd., the 28-year-old minnow lender, has been placed in receivership after falling short of tougher regulations governing finance companies, the first such failure because of the harder line.

Perpetual Trust head of corporate trust Matthew Lancaster said Brett Chambers and Paul Munro of Deloitte were appointed receivers after the company wasn’t able to hold enough cash to meet the Reserve Bank’s stricter line on non-bank deposit takes. Some 227 investors are owed about $17 million, none of which was covered by the government’s extended retail deposit guarantee.

“Finance and Leasing has been unable to re-gear its balance sheet sufficiently in the time available on a consistent basis,” Lancaster said in a statement. “The receivers will need to make their assessment of the state of the company’s assets and liabilities before any estimate of return of investors’ funds can be made.

The central bank was expecting more failures and consolidation in the non-bank finance sector after it imposed higher requirements for finance companies, credit unions and building societies after the sector’s collapse in the past five years. The new regulations came into effect on Dec. 1.

Finance & Leasing applied to the Reserve Bank for a waiver on its breach, but the three month stand-down period meant it wouldn’t be able to lodge a prospectus to raise funds from the public and couldn’t keep operating.

The receivership ends a torrid two years for Christchurch-based Finance and Leasing, which reported losses in the 2010 and 2009 financial years, and it was forced to tap investors for an additional $600,000 in the 12 months through March last year.

(BusinessDesk)

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