Equiticorp will hit property—P.M.

Press, 25 January 1989, Page 24

Equiticorp will hit property —P.M.

The Equiticorp collapse would have a depressing effect on the New Zealand property market, the Prime Minister, Mr Lange, said yesterday.

Referring to the glut of commercial office space in Wellington — put at around nine hectares in one recent report — Mr Lange said the effects would be significant.

“But the effect is managed; it will be orderly. Those people who are in the job of receiver managers are competent people, some with vast experience, and that will come to be seen as an important step for the Government to have taken,” he said. Mr Lange said it was “perfectly apparent” that major institutions knew some time ago that Equiticorp was undergoing a process of liquidation, although it was not a formal liquidation.

Because of this, the reaction in the sharemarket had been less than would otherwise have been anticipated. “The fact of the matter is that the market had it sussed out some time ago,” he said. Nor would there be efforts to prop people up, he said.

The Leader of the Opposition, Mr Bolger, said yesterday that the use of the Companies Special Investigation Act to appoint statutory receivers and managers for the collapsed Equiticorp group raised serious questions as to why the Minister of Justice did not use those powers with the RSL fiasco of last year.

RSL (Registered Securities, Ltd), an Aucklandbased contributory mortgage company, collasped last August.

“Mr Palmer was informed on a number of occasions, by both the Opposition and media commentators, that this same act could have been used to protect the thousands of investors in the RSL and Landbase groups,” Mr Bolger said. Mr Bolger said Mr Palmer’s action was the correct course of action to protect Equiticorp investors and creditors “but it will stand as a late admission of culpability over earlier omissions last year.”

BNZ exposure Bank of New Zealand directors were last evening debating whether to release details of their company’s exposure to the Equiticorp group of companies. The Opposition spokesman on State-Owned Enterprises, Mr lan McLean, said the bank should follow the lead of overseas companies, such as Elders Finance Group, and say how much they had at stake with the group.

But a spokesman for the bank said it was not its policy to release details of a private client’s dealings and to do so would set a disturbing precedent. The bank’s executives had prepared a document on their exposure to Equi-

ticorp but had not decided whether to make it public, the Press Association reports. The spokesman could not comment on a statement by the Minister of Justice, Mr Palmer, on Sunday that the BNZ’s loans to Equiticorp totalled about SSOM. NZI has said its loans to Equiticorp were minimal. NZl’s corporate affairs adviser, Mr Owen Cook, said his company had not commented on its exposure to Equiticorp because it was not concerned about it.

In Australia, Elders Resources NZFP managing director, Mr Geoff Lord, confirmed that Elders Finance’s sAust73M (SNZIOOM) exposure to Equiticorp was fully secured over N.Z. Steel assets.

Several large creditors have made their exposure known with most of them saying their money was well secured.

• The British banker, Samuel Montague, and 27 other banks lent Equiticorp $371 million in syndicated loans to help finance the 61 per cent take-over of merchant banker, Guinness Peat Group, last year. Those GPG shares are the collateral for the loan.

• The managing director of the ANZ Bank, Mr Will Bailey, said in Melbourne that his bank’s exposure was about SIOOM, but this was only a “guesstimate” and included exposure to the 30 per cent owned by Fisher and Paykel Industries.

• The chief executive of Elders Finance, Mr Ken Jarrett, said his company had an exposure of SIOOM, none of which was secured by Equiticorp shares. • The State Bank of South Australia said it had exposure of much less than SIOOM and slightly more than SSOM.

Aust. liquidator In Sydney yesterday, the New South Wales Supreme Court has approved the appointment of a provisional liquidator in Australia for Equiticorp International. He is Mr John Harkness, of Peat Marwick Hungerford in Sydney. Australian newspapers yesterday gave conflicting reports about the interest Australian companies have in buying N.Z. Steel from Equiticorp. The "Sydney Morning Herald” said Elders Resources NZFP had already begun negotiations to gain control of N.Z. Steel.

The managing director of Elders Resources NZFP, Mr Geoff Lord, confirmed that Elders Finance’s sAust73M (SNZIOOM) exposure to Equiticorp was fully secured over N.Z. Steel assets.

"The only part of the Elders group that would be interested in NZ Steel is Elders

Resources,” he said. “We do have an interest, but at this stage only embryonic discussions have taken place.” The successful purchase of N.Z. Steel by his group would result in a restructuring of Elders Resources-NZFP, Mr Lord said. However, he added that as Elders ResourcesNZFP was a New Zealand company it would have difficulty in gaining Commerce Commission approval for such a purchase. The "Australian Financial Review” quoted the executive director of Elders Resources NZFP, Mr John Cornelius, as saying his group was not seriously looking at buying N.Z. Steel. Broker defaults The New Zealand sharebroker, Ararimu Partners, part of Ararimu Holdings, the family investment vehicle of Equiticorp’s chairman, Mr Allan Hawkins, has been declared a defaulter under the rules of the Stock Exchange. As reported yesterday, Ararimu Holdings reported a loss of $25.2 million for the year ended September 30.

Ararimu Holdings was placed in statutory receivership after the collapse of the Equiticorp group. The annual report listed investments at balance date of $21,535,000. A spokesman for the company said the bulk of this was in Equiticorp group companies. In addition, the accounts disclosed guarantees of $43,120,000. A note says the company has guaranteed the obligations of a third party and in return has received a call option in respect of listed public company shares. Mr Hawkins, who is joint managing director of Ararimu, declined to comment on the guarantees. He said the company, which had about 200 employees and 640 shareholders, would continue to operate as normal for the present. Liberia link? Meanwhile in Britain the London Stock Exchange is seeking to establish a link between Equiticorp and the Liberian company, Grimper Trading, British newspapers report. Grimper is the centre of investigations into alleged share-rigging in Guinness Peat Group shares between October, 1987, and the middle of last year. Equiticorp previously has denied it is connected with Grimper, which allegedly bought and sold Guinness Mahon and Guinness Peat Group (GPG) shares over several months to manipulate the share price and keep it in a narrow range.

Equiticorp acquired a 61 per cent stake in the financial services group, GPG, in October, 1987. Guinness Mahon, the merchant bank, “demerged” in June last year from GPG and Equiticorp retained a 60.9 per cent stake in each unit.

Equiticorp’s stake in Guinness Mahon is now held by a syndicate of London banks that is seeking a buyer for parts or all of the shareholding. "The Times” reported that the Bank of England had persuaded regulatory authorities to delay an investigation into Equiticorp share dealings in GPG because of the imminent sale of Guinness Mahon. The bank was concerned news of the sale would frighten off potential buyers. The paper said the Guinness Mahon stake was put on sale after the bank decided that Equiticorp was not a “fit

and proper” owner of a British bank.

The sale of Equiticorp International’s 60.9 per cent stake in Guinness Mahon Holdings will be the first test case for the Bank of England’s 1987 Banking Act. The act, which came into force only days after the New Zealand group acquired its shareholding, empowers the bank to block a holding above 14.9 per cent in a British bank.

The Bank of England declined comment on its view of the sale.

Banking sources said potential buyers, especially from abroad, will look very closely at the bank’s ruling. The 1987 act states the buyer must be “a fit and proper person.” “The Bank of England was keen to block the Equiticorp take-over in (October) 1987,” said a bank official.

“They thought of everything behind the scenes, but under the old banking act it would have been difficult and expensive to prove that Equiticorp was unsound.” Equiticorp finalised the take-over only days before the new act came into force. No link

In Wellington yesterday, the branch manager of Equitilink N.Z., Mr Brett Perry said there was no connection between his company and Equiticorp International Pic. Mr Perry said he was concerned that investors might be confused after Equiticorp International’s provisional liquidation.

BNZ not releasing exposure