Larry Schlesinger | 16 November 2012

Frustrated Provident Capital debenture holders to vote on fairer distribution policy at December 13 meeting

A meeting of Provident Capital debenture holders has been called for December 13 with the aim of voting on a new arrangement, which receivers Phil Carter, Tony Sims and Marcus Ayres from PPB Advisory believe will result in a more efficient and fairer distribution of money following the non-bank lender and mortgage fund manager being declared insolvent.

Provident Capital, a lender of last resort, collapsed in July leaving around 3,500 small investors who placed their savings in Provident’s fixed interest debenture fund out of pocket with an average investment size of $30,000.

The fund was frozen when Provident collapsed and investors have not received any payments in the past five months.

Since their appointment PPB Advisory have recovered funds from just two of the 49 loans in the fixed interest debenture fund totalling $4.8 million with only one loan discharged in full,leaving 48 loans undischarged with a closing book value of $109.9m as of September 30.

The receivers have also returned $5.6 million (six loans) of the $74.2 million owed to Adelaide and Bendigo Bank, which must be repaid first before debenture holders can receive payments.

Receivers are marketing another three properties for sale, but have identified six properties "which are not suitable for sale at this time, predominantly due to planning issues".

Most of the mortgages were provided to property developers on very high interest rates that could not secure bank funding.

“The Receivers understand the frustration of debenture holders that we are unable to commence distributions at this time,” says PPB advisory in a note on its website.

At the December 13 meeting, debenture holders will be asked to vote on a proposal to amend the debenture trust seed to facilitate the new payment structure and will also receive an update from PPB Advisory on its efforts to discharge loans.

Currently the trust deed provides that interest will be payable before principal.

The proposed amendment of the trust deed is designed to facilitate the payment of interim distributions in the following order:

  • first, the return of interest accrued but unpaid as at 3 July 2012 on all debentures (whether interest was paid periodically or on maturity);
  • second, capital (as in the face value of your debenture); and
  • finally, in the unlikely event that there is any surplus, interest at the rate of 10% per annum for the time which the face value of debentures remained unpaid.

The outcome of the vote and the wishes of debenture holders will be taken into account at a court meeting on December 17, where the receivers will propose the amendment.

An informal information session will follow with debenture holders invited to submit questions prior to the meeting.

A meeting will be held in Sydney and broadcast in Melbourne, Brisbane, Adelaide and Perth.

Debenture holders can either vote in person or by proxy.

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