Receivers deny Aylesford role

Press, 18 February 1989, Page 18

Receivers deny Aylesford role

The receivers of Equiticorp International yesterday denied that Aylesford Securities, an overseas Equiticorp company, was involved in the funding of New Zealand Steel shares.

In a statement yesterday, the receivers said that there had been speculation that Aylesford was involved in the transaction in the paying of $327 million for the Government’s 89 per cent stake in New Zealand Steel. However, the receivers said that they were not willing to release details of their investigation into the method of how the purchase of the shares in New Zealand Steel was funded, at this stage. A report was being prepared and an announcement would be made in a week. The receivers said their reasons for not releasing details now was that it was premature and could be prejudicial to the interests of shareholders. The receivers also said that the statement of affairs required by cotirts in Australia and Hong Kong from the liquidators and receivers of Equiticorp companies were proving difficult to prepare. This was because of the crosslinks between the business activities in eaqh country, they said. “The completion of the statement of affairs for any particular country depends on an assessment of the value of all group assets, because of the inter-linking between the countries and because of inter-company guarantees and cross securities.” These were examples of why the initial processes of receivership might appear protracted to the media. The statement also said that on February 3, the receivers had obtained interim injunctions from the High Court preventing the Auckland and Waitemata Electric Power Boards insisting that pre-receiver-ship debts be paid as a precondition for continuing power plyGPG sales Meanwhile, NZPA-Reuter says from London that merchant bankers, NM Rothschild, expects the sale of Equiticorp’s 61 per cent stakes in GPG .(formerly Guinness Peat Group) and Guinness Mahon will be hampered by both companies’ appearance on the market last year. Rothschild, appointed adviser to the sale after a syndicate of 28 banks led by Samuel Montagu took control of the collapsed group’s holding last month, said it would have to'try and “rekindle” interest in both companies. They had been “widelyshown” last year after Equiticorp split mer-

chant bank Guinness Mahon from the group and put both on the market without finding a ' buyer, said Rothschild spokesman, Mr Russell Eady. “It doesn’t help the credibility of the article being sold,” he said, adding that he thought the underlying businesses of both companies were sound. Rothschild had been approached by a small number of buyers for both companies, some of whom had expressed interest last year but had not exactly fought each other to take them away. “It may be that some of the ones who’ve come back again do have a genuine interest,” he said. Buyers’ enthusiasm would be tested over the next few months when they were asked to put a price on the two companies. But Mr Eady was reluctant to predict when a sale on either might be wrapped up while negotiations were at such an early stage. . Equiticorp borrowed SNZ37OM to finance the GPG take-over, secured by the shareholding itself. The shares passed into the banks’ control when the liquidators were called in in New Zealand. Meanwhile, the Bank of England and the Serious Fraud Office have been investigating allegations that Equiticorp manipulated GPG’s share price in the months after the 1987 crash. “The Times” newspaper reported last month the dealings were designed to stop the GPG price falling below a trigger price that would have required Equiticorp to put up more collateral for the syndicate loan. Two more Australian companies will be liquidated as part of the winding up of Equiticorp International. The two Australian Capital Territories registered companies are Kinclare (No. 1) Pty and Kinclare (No. 2) Pty, the provisional liquidator said yesterday. The companies existed to form joint ventures with finance provided by other companies within the Equiticorp Finance Holdings Group (EFHL).

The announcement means Mr Clyde Dickens, a partner in the Sydney office of the accountancy firm, Ernst and Whinney, will act as provisional liquidator for eight Equiticorp companies — all 100 per cent owned by EFHL. Another Ernst and Whinney partner, Mr Doug Oldfield, of Melbourne. was appointed provisional

liquidator of EFHL on January 23. Mr Dickens is to make a report on his investigations to the New South Wales Supreme Court on March 16. ‘Flawed’ act

Flaws in the new Securities Amendment Act’s provisions against insider trading may mean they are a “dud” for Equiticorp shareholders who feel they were victims of the banned practice, according to an Auckland lawyer. Mr Clive Bradbury, a commercial partner in Brandon Brookfield, says because of what may have been a big drafting blunder in the law, it still seems impossible to discover who is behind nominee companies which could have been major sellers of Equiticorp shares just before the collapse. In his firm’s latest “Viewpoint” client newsletter, Mr Bradbury says those who recently, bought Equiticorp shares could still be left out in the cold because of the blunder in the law.

Mr Bradbury reviews other laws relating to the Equiticorp situation. The Companies Special Investigations Act, 1958, under which the Government placed ■ Equiticorp in statutory receivership, is actually based on a 1934 act aimed at curtailing the activities of some businessmen who successfully promoted large investments in two respectable sounding companies that subsequently ran into difficulties.

Both the 1934 and 1958 acts were passed under urgency and in “the dead of night.” “No doubt anticipating further financial disasters following the October, 1987, sharemarket crash, the Government sought to introduce the Corporations (Investigations and Management) Bill as a replacement,” Mr Bradbury says. - “Uhfortunately, it was so poorly drafted that it met a solid wall of opposition and was not available when Equiticorp went under.”

The newsletter is intended to give advice on dealing with Equiticorp companies now in receivership. It advises trading with individual companies in the group on a cash only basis until their financial situations are clarified by the receivers. •» The newsletter notes that this may be the best course of action in dealing with Equiticorp while it is in receivership, because statutory receivers do not have personal liability for contracts they enter into.