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 the roughly $130 million invested in Provident Capital debentures?
About $130 million of investor money in Provident Capital debentures is currently held up after receivers were appointed. PPB Advisory (Phil Carter, Marcus Ayres and Tony Sims) are managing the situation and have told debenture holders there is hope a small trickle of repayments could begin before Christmas, but they made no firm promises.
Who are the receivers handling Provident Capital and what are they doing to recover money for debenture holders?
The receivers are PPB Advisory partners Phil Carter, Marcus Ayres and Tony Sims. They have been reviewing Provident’s books, presenting findings to debenture holders, negotiating with lenders such as Bendigo and Adelaide Bank about buying parcels of ‘good’ loans to generate cash, and have said they will forgo taking their fees (although fees will continue to accumulate) until money starts to flow back to investors.
How risky was Provident’s fixed‑term investment (FTI) loan portfolio?
PPB found the FTI portfolio was highly concentrated and risky: about $108 million in loans had roughly $60 million concentrated in just seven loans, including a single $22.4 million construction loan believed to be linked to Gold Coast developer Pat Zarro. Many borrowers were behind on repayments — the article notes close to 90% were behind — with some large loans four years in arrears. By the time receivers took control, Provident was mortgagee in possession of 19 of 42 loans, representing about 80% of the lending book by value.
Is there any realistic chance debenture holders will get money back soon?
Receivers said there is a possibility of some repayments before Christmas if they can generate cash by selling ‘good’ loans to third parties like Bendigo and Adelaide Bank. However, they gave no guarantees. Recovery is complicated by the number of loans in long arrears and other assets tied up, so while there is cautious hope, investors should temper expectations.
What creditor claims and other liabilities did the receivers identify in Provident’s filings?
A report lodged when receivers were appointed listed unsecured creditor claims including Provident founder Michael O’Sullivan claiming more than $465,000 of $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 about $240,000. The report also showed about $8 million tied up in bills of exchange with Global Brands Holdings (associated with the failed Yarraman Estate wine group and businessman Gary Blom) that had matured but not been repaid.
What is happening with Alesco Corporation and Dulux Group’s takeover bid?
Dulux Group launched a hostile takeover bid for Alesco (about $200 million) and its stake rose above 42%, prompting talks between the two companies and a temporary trading halt. Dulux has declared its $2.05 per share offer ‘last and final’ so it cannot increase that price, but Alesco could try to make the deal more attractive to shareholders by declaring another special dividend. The Alesco board has already declared a 5% final payout plus a 10% special dividend, and there has been discussion around franking credits and how much cash might be left in Alesco when control changes hands.
How have different types of investors responded to Dulux’s takeover of Alesco?
Most of the acceptances for Dulux’s bid have come from professional investors, including investment group Argo. Dulux has had less success persuading retail shareholders, who make up the bulk of Alesco’s share register, to accept the offer.
Are there any regulatory or dispute actions underway in the Alesco‑Dulux situation?
Yes. Both Alesco and Dulux have filed applications with the Takeovers Panel disputing statements made by the other. The article notes that because the panel has not publicly commented since the applications were made, hearings are likely under way.
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