INVESTORS with $130 million trapped in the collapsed Provident Capital have been given some hope, but no promise, that a trickle of capital repayments on their debentures might begin before Christmas.
Provident's receivers and managers, Phil Carter, Marcus Ayres and Tony Sims, from PPB Advisory, held a meeting yesterday for debenture holders in Sydney, with televised participation by investors in other states.
Close to 300 of the 3500 debenture holders took part, including Provident founder and chairman Michael O'Sullivan (above right) and three fellow directors. Insider has been told they did not speak at the meeting, or stay until the end of the question and answer session, a great shame because some of the slides shown to investors beggar belief.
According to PPB's investigations, of the $108 million of loans in its fixed-term investment (FTI) fund, $60 million was concentrated in just seven loans with a single loan of $22.4 million on one construction project, believed to belong to Gold Coast developer Pat Zarro.
Aside from what Insider considers to be a risky profile for what is essentially retirement investment money, the big loans were massively behind in repayments.
Insider was gobsmacked a few weeks back to learn that close to 90 per cent of those who had borrowed money from Provident's FTI portfolio were behind in their payments but PPB's findings were even worse than that.
That big loan, and another of $4.5 million, are four years in arrears, and three others worth a total of $18 million, have not been meeting repayments for more than three years. By the time PPB took the reins at Provident, the company was mortgagee in possession of 19 out of 42 loans, or 80 per cent of its entire lending book by value.
It is not, though, all doom and gloom for debenture holders because the PPB team is talking with Bendigo and Adelaide Bank, which also has a much cheerier $70 million loan book under Provident's wing, about buying parcels of "good" loans to generate some cash that can be returned to investors. PPB has also indicated it will forgo its fees, although they will still be accumulated, until money starts to flow for the debenture holders.
A report filed with the corporate regulator last Friday on Provident's financial position when receivers were appointed shows Mr O'Sullivan claims to be owed more than $465,000 of $801,000 in unsecured creditor claims. Fellow director, and Provident's in-house counsel, Malcolm Bersten, has claimed he is owed almost $192,000. and accounting firm KPMG wants $44,000. Employees were owed $240,000. That report also shows Provident had $8 million tied up in bills of exchange with a company, Global Brands Holdings, that have matured but not been repaid. Global Brands is associated with the failed Yarraman Estate wine group and businessman Gary Blom.
Deal sweetener
ROLL-A-DOOR maker Alesco Corporation is believed to be considering declaring another special dividend to investors as part of a deal to recommend the $200 million hostile takeover from paint and adhesives giant Dulux Group.
Both companies called a halt to trading in their shares until at least tomorrow while they try to hammer out a deal from talks that began last week when Dulux's stake in Alesco rose above 42 per cent.
For the first time since early May, when Dulux said it had bought just under 20 per cent of Alesco and was bidding for the rest, the groups are in talks on a compromise.
Because Dulux has already declared its increased $2.05 a share offer "last and final", it cannot actually raise that figure but there is nothing to stop Alesco declaring another special dividend.
The Alesco board has already declared a 5? final payout plus a 10? special dividend, although Dulux will reduce its payment to shareholders to allow for less cash in Alesco's bank account when it acquires control. Dulux has already said it would allow investors to keep up to 18? of franking credits, which implied a maximum of 42? in dividends.
That means that Alesco could be considering paying out anywhere up to 27? a share to investors.
While that is not quite control of Alesco in an accounting sense, which requires 50.1 per cent, business whizzes have proved you can direct the future and structure of a company with far fewer shares usually anything more than 30 per cent of the votes.
Most of the acceptances received by Dulux have been from professional investors, the last of them the investment group Argo, but it has had far less success with the retail shareholders who make up most of Alesco's share register.
The two companies have filed applications with the Takeovers Panel disputing one another's statements. Given nothing has been said by the panel since either application was made, that is usually a good indication hearings are under way.
imcilwraith@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
What happened to Provident Capital and how much investor money is affected?
Provident Capital went into receivership with about $130 million of investor money described as 'trapped'. Investigators also identified roughly $108 million in loans inside Provident’s fixed‑term investment (FTI) fund that the receivers are now assessing.
Who are the receivers handling Provident and did they say when repayments to debenture holders will start?
PPB Advisory partners Phil Carter, Marcus Ayres and Tony Sims are the appointed receivers and managers. At a meeting with debenture holders they said a small trickle of capital repayments 'might' begin before Christmas, but they stressed there was no firm promise and the timing is uncertain.
Why are Provident’s loans considered risky for retirement‑style investors?
PPB found a high concentration of risk in the FTI fund: $60 million of the $108 million loan book was concentrated in just seven loans, including a single $22.4 million construction loan linked to a Gold Coast developer. Many of those large loans were well behind on repayments — some three to four years in arrears — and 19 of 42 loans were mortgagee‑in‑possession, representing about 80% of the lending book by value.
What actions are the receivers taking to recover money for Provident debenture holders?
PPB is talking with Bendigo and Adelaide Bank about selling parcels of 'good' loans to generate cash for investors. The receivers also said they will forgo charging their fees (although those fees will still accumulate) until money starts flowing back to debenture holders.
Were there any unsecured claims or other liabilities disclosed when receivers were appointed?
Yes. A report filed when receivers were appointed showed unsecured creditor claims including Provident founder Michael O'Sullivan claiming more than $465,000 of about $801,000 in unsecured claims, director and in‑house counsel Malcolm Bersten claiming about $192,000, accounting firm KPMG claiming $44,000, and employees owed around $240,000. The report also noted about $8 million tied up in matured bills of exchange with Global Brands Holdings that had not been repaid.
How might the Dulux takeover bid affect Alesco shareholders and is a special dividend possible?
Dulux Group has made a hostile $200 million takeover bid for Alesco and trading in both companies was halted while they negotiated. As part of talks, Alesco is believed to be considering another special dividend to encourage shareholders to support a recommended deal. The Alesco board had already declared a final payout plus a special dividend, and Dulux has said its $2.05‑a‑share offer is 'last and final'.
What has been the shareholder response to Dulux’s bid for Alesco?
Most of the acceptances Dulux received came from professional investors (the article notes investment group Argo among them). Dulux has had far less success persuading retail shareholders, who make up the majority of Alesco’s register.
What practical expectations should Provident debenture holders have in the short term?
Debenture holders should expect uncertainty. Receivers have said a small flow of repayments might start before Christmas but gave no guarantees. Recovery depends on sales of 'good' loan parcels (discussions are underway with Bendigo and Adelaide Bank), the outcome of distressed loan recoveries, and other creditor claims — so any return of capital may be slow and partial.
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