Provident investors hoping for happier 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