Auckland finance company Vision Securities has gone into receivership, but Treasury says investors will get all of their money back.
Vision Securities is a specialist property financier for the retirement village sector and a provider of general development finance and has been trading for 9 years. It has 953 debenture holders with $28 million invested.
It becomes the third company that has gone into receivership that is covered by the Government's retail deposit guarantee scheme. The others were Strata Finance and Mascot Finance, which resulted in payouts worth $35 million.
48 finance companies with a total of $6 billion in investor funds have failed since May 2006.
Perpetual Trust Head of Corporate Trust Matthew Lancaster said the directors requested receivers to be appointed following the failure of a major loan that was to be settled last week.
"The directors are now concerned about the company's on-going liquidity and believe that in due course the company would be unable to meet its ongoing debenture obligations," he said.
The company's borrowers were finding it increasingly difficult to refinance or repay their maturing loans, the directors said.
Vision Securities Limited had decided receivership was the best option to protect all investors and to ensure investors were treated fairly.
Rod Pardington and David Levin of Deloitte have been appointment receivers of the company.
The receivers say they expect to release a report on their initial
findings "as soon as possible".
Treasury said depositors would be contacted within six weeks when they would be told how they could claim under the terms of the guarantee, he said.
Treasury Director of Financial Operations Brian McCulloch said he expected an orderly process of payment to be eligible to Vision Security depositors.
New deposits and the roll-over of existing deposits after the default of the company, were not covered by the scheme.
"In circumstances such as this, when the guarantee is triggered, it is important to remember that it is the eligible depositors that are guaranteed rather than the company," he said.
The Crown retail deposit guarantee scheme was introduced at the end of 2008 to give New Zealand depositors confidence that their money would be secure in the event of an approved financial institution failing.
"Over the life of the scheme, exits, mergers and wind-downs will occur. This is normal financial sector activity and is expected to continue even though the guarantee scheme is in place," McCulloch said.
In February, Vision was put into the high risk category by rating agency Standard & Poor's, which issued it a B credit rating with a negative outlook, amid the flurry of companies lining up to meet Reserve Bank regulations that require non-bank deposit takers to be rated.
Today's announcement prompted S&P to downgrade the company's rating to a D, with any further write-downs of the company's loan book likely to breach its trust deed.