NEW ZEALAND FINANCE COMPANIES NO

DIFFERENT THAN WHAT HAPPENED IN THAILAND

In NZ the ninth and latest finance company collapse, that of Finance and Investments crashed in Sept 2007, has alarm bells ringing at the Securities Commission as the $16 million business had operated for more than 30 years without the regulator knowing it existed.
Finance and Investments, which is unrelated to an Eric Watson and Mark Hotchin-controlled company with a similar name, owes $16 million to 370 investors including $1.25 million to Nelson-based LDC Finance, which was placed in receivership on Tuesday owing 100 investors $19.3 million.Finance and Investments was structured as a partnership between Andrew Harding and Murray Scholfield, LDC's majority owners.It began financing vehicles in 1973 and most investors were Harding and Scholfield's friends and relations.While Finance and Investments' business was much like that of a finance company - it was principally a provider of hire purchase and vehicle finance - it did not have a prospectus and yesterday it was unclear whether it had issued any form of securities such as debentures or notes.
Bad loans, topped by Bridgecorp which failed owing $500 million.
National Finance 2000, fell over in May last yearand then Western Bay, collapsed so that should have sent bells ringing for investors to get their funds out of any Finance Company that was not afiiliated with a Bank.
 Five Star Consumer Finance became the third finance company in just over a week to be put into receivership. Five Star’s announcement came a day after NZAX-listed PropertyFinance was put into receivership owing debenture holders more than $80 million. Five Star Credit is part of a privately owned group of companies trading under the Five Star banner.
 LDC, the fourth finance company to collapse in a fortnight and the eighth in 16 months, was one of 66 companies to tell the Securities Commission last week that its prospectus was up to date and not misleading??? but read on............

Five Star Consumer Finance, which collapsed into receivership in August, is facing claims it deliberately misled the public to obtain debenture money. Sunday Star Times | Sunday, 21 October 2007 At the time, Five Star Consumer Finance was telling investors it was focused on consumer lending small loans to large numbers of people. Not so, argues Geoff Birss, a civil engineer with $235,000 invested in the company, $100,000 of which he invested the week before it collapsed. Birss has complained to the Commerce Commission, claiming he has "evidence that Five Star Consumer Finance Ltd has set out to deceive the public investor". Not only was Five Star's advertising misleading, argues Birss, but so were its direct communications with him.

With investor sentiment undermined by the Bridgecorp collapse, Birss received a letter on July 18 from Five Star Consumer Finance which assured him: "Five Star focuses its business on assisting consumers in the purchase of mostly household goods."

The reality, he claims, was that just 30% of Five Star's lending was consumer finance. The rest was related-party loans and other commercial loans which receiver Richard Agnew calls "high value, complex loans which appear to be outside of normal commercial lending practices". The letter went on: "Our average loan is $4000 with a term of three years. The quality is represented by our low rate of bad debts which are just over 1%." The reality: The average loan size at the point of collapse was closer to $6000 because there were 72 commercial loans worth more than $40 million, and the receiver believes that 1% is likely to be more like losses of up to 75% for debenture investors. Birss is not alone in claims Five Star Consumer Finance misled investors. Outspoken Kapiti Coast financial planner Chris Lee said: "There is a big difference between what was being said to the public and what the reality was. They have some huge loans, which appear to be commercial loans to related parties. That's got nothing to do with consumer finance."Some commercial loans are identifiable, such as the $3.971m lent to Five Star Consumer Finance subsidiary Vintage Finance, which made commercial loans to vineyards.

Others are harder to understand, such as loans to Five Star Finance, a related company owned wholly by one of Five Star Consumer Finance's directors, and part-owner through the ownership of shares in Five Star Consumer Finance's parent company Antares Financial Holdings (held through Andromeda Investments), which also borrowed from its subsidiary for reasons the receiver said are still being investigated.Trustee Graham Millar from Covenant Trustee Company said it was not liquidity issues which had led to the receivership.Other investors are also out of pocket. Five Star Consumer Finance was sold in 2006 to Antares Financial Holdings, specially set up to buy it. That company issued non-voting, quarterly interest-paying preference shares to dozens of private investors to fund the purchase.One investor, Tony Rodgers from Mt Manganui, who has $2000 invested in Antares, said Antares missed its September interest payment

Nelson-based LDC Finance has gone into receivership after a run on its funds in the past few days, owing its 995 depositors and debenture holders $19.3 million. Its total finance assets are put at $23.8m. Nelson-based Finance and Investments has become the fifth finance institution to go into receivership in about a fortnight. The firm, which specialises in car finance, was placed in receivership on Wednesday 5 SeptemberThe Nelson organisation is a partnership and not related to Auckland finance company Finance & Investments Limited, which is controlled by Mark Hotchin and Eric Watson, who control Hanover finance. LDC, the fourth finance company to collapse in a fortnight and the eighth in 16 months, was one of 66 companies to tell the Securities Commission last week that its prospectus was up to date and not misleading???
Nathans Finance Ltd was placed into receivership, owing $166 million to around 6000 investors. This is the 6th company to run for broke.
Five Star Consumer Finance became the seventh finance company to fold in the past 18 months. It thought to owe $50 million to about 3000 debenture investors.
Property Finance said on Tuesday 28 August it had asked its trustee to appoint receivers. The company, which has debentures of over $80 million and loans of over $630m, reported on Friday it was in deep trouble and unlikely to be able to honour its debts. It is the sixth finance company in 15 months to collapse and the second in just over a week. Property Finance, formerly Avon Investments, reported in its 2007 annual report it had loans receivable of $412.6m, and cash or cash equivalents on hand of $109.2m. The accounts showed it had debt notes of $425.9m and debenture stock of $86.6m. Property Finance’s shares last traded at $1.10, having fallen from $1.38 in June. The company is capitalised at $15m. Last week, Nathans Finance was put into receivership with 6000 investors owed $166m.

Clegg and Co. Finance was put into receivership Oct 5th 2007 Thursday, the tenth New Zealand finance company to collapse in the last 16 months, after it lost most of its shareholders' funds, a trustee said.A spokesman for Covenant Trustees, a company which provides statutory supervision of such companies, says Clegg and Co. has around 500 investors who have sunk around $15 million into the company. Staff of the finance company closed the door on ONE News on Friday as it fell into the hands of receivers. In total 52,000 investors have potentially lost a staggering $1.231 billion.

Nine local nonbank financial institutions have already failed after defaulting on debt payments as insecurity in global credit markets sparked by the U.S. subprime mortgage crisis spread to New Zealand. The nine firms have owed about 1.14 billion New Zealand dollars (US$798 million; €587 million), authorities said.

WHY LEND TO FINANCE COMPANIES?
Many lend to high-risk borrowers because the borrower can’t get loans from regular banks at a much lower rate. Most are in the hire purchase game, with high lending rates, and can be said to be loan sharks. The current credit crisis in the US, Thailand and many other countries like NZ which has reverberated through financial markets around the world, was problems in the "subprime" mortgage market. Banks, finance companies and others lend to those are a less than prime risk - having undeclared income, bad track record, high risk business, or whatever. It’s a massive market in the US, valued at hundreds of billions, and even more than most markets is based on confidence. If lenders stop the flow of funds to these organisations, then things rapidly turn bad. Similarly, with finance companies in New Zealand. Requests to withdraw funds are being turned down for liquidity reasons, and most finance companies are not obliged to accept claims for early withdrawal except in the case of extreme hardship or death. If banks start to cut back lines of credit the situation could get even worse. Down the track, there is also a risk that property-related lenders could face the added pressures of a slowing housing market.

WHOSE TO BLAME?
The lenders or the investors? Well the investors lend because of greed really or naïve as to finance companies and what they do with that money. They prefer to get the best interest rate they can so they invest in finance companies like Bridgecorp NZ whose risk was known way back in April 2007 with a manager who had a no so good track record. They fail to see what might happen and when it does they blame everyone but themselves for 1-2% more interest than the banks give. Many investors had received poor financial advice and potential investors should ask more questions of their financial advisers before making investments. Remember too the sales rep is only after a commission so the idea is to lock you in. Many finance companies work on “paper money” buying into prime property then reassessing the value of and using this figure to hype the books to look good. So dummy you then invests because they now have a nice portfolio. Remember the 87 crash??? Don’t invest in finance companies as they will do what they think will make money but not all the time this works and certainly not at the moment in sub prime property loans.
Of the main 50 or so finance companies in NZ, only five have ratings from RBNZ-approved rating agencies Standard & Poor's, Fitch or Moody's.

REMEMBER IN USA ITS ALSO STARTED & THE SAME CAN HAPPEN IN THAILAND:

Countrywide Financial Corp, the largest mortgage lender in the US had to raise emergency funds of $US11.5 billion ($NZ17b) this week to reassure customers after a Wall Street analyst suggested it could end up in bankruptcy if the liquidity crunch sparked by rising mortgage defaults worsened. In Thailand situation the previous government gave money out to to anyone but the Banks have pulled the reins but this has allowed loan sharks to take over the vaccuum.Again too much money is allowed to too little safe and secure public who cannot no longer service their loans.

WHY INVEST YOUR MONEY IN A FINANCE COMPANY

TO A PERSON YOU DON'T KNOW THEN LOSE IT ALL

As more finance companies are going against the wall why are you investing and entrusting your life savings to a finance company. Finance companies undermine monetary policy with a cost advantage gained by attracting deposits from "illusionary" investors who do not realise they are lending money at rates too low for the risk they are taking. If this sector were subject to the same continuous disclosure obligations as listed companies the flow of discounted money into the property market would reduce, and cool that market.

Our advise don't invest in Finance Companies at the moment --buy some gold instead or wait as a bubble is starting to grow. Buy the gold but put into your own bank safety deposoit box not the sellers. Safeguard your fund yourself and do not entrust in a finance company who SAYS they have a portfolio too good to be true. Too many finance companies show false "paper profits" that are basically reappraisals on land and property aquisitions.

WHY USE OUR SERVICES: 

• We work for you (Both Thai & foreign consultants )
• No hidden charges-everything is up front.
• Guaranteed conveyancy help &  Company, work permit & land  setup for foreigners
• We will sell your Commercial property, houses, businesses, bars and Guest Houses
• Because you have the benefit of foreign help with our Thai lawyers and expat consultants
• We offer: Full house onsite appraisals. Cost is 3000 baht for a house under 2 years old & 6000 baht for older houses ( plus travel if out of town ). This 5-6 page report is a must if you want to know what your house is really like which includes pics of repair work needed and we even do a air con survey (extra).
• Need help in Investments in NZ: See SPICER & ASSOCIATES in Levin NZ. Mrs Natalie Martin: for all investment information. She helps Asia Trading Post as well and advised against Bridgecorp to investors. Just write to us.

BANGKOK REAL ESTATE Please go to : www.bangkokrealty.biz