R. Smart found to be insolvent

Press, 26 July 1989, Page 31

R. Smart found to be insolvent

PA Wellington Richmond Smart Corp is insolvent and the prospects for shareholders and unsecured creditors are “not good,” statutory managers for the property and investment group said yesterday.

They said it was “most unlikely” shareholders would receive any return when assets are sold unless the

situation facing Richmond Smart is unexpectedly improved. Messrs Fred Watson and Graeme McDonald said they sought to have the shares delisted on the Stock Exchange. In a three-page statement, the managers said it had taken four months to determine the group’s financial state at the time of their appointment on March 3. They had adopted a realistic approach to valuing the Richmond Smart property portfolio and other assets. “The value of these assets is now less than the amounts owing to secured and unsecured lenders,” Messrs Watson and McDonald said. "This means the group is insolvent.” This was a significant change from the $72 million of shareholders’ funds reported by the group last December 31. But Richmond Smart was now being viewed on a realisation basis, not as a going concern, the managers said.

Some secured creditors would not be paid in full and when viewing each of the companies in the group,

there would be no funds for unsecured creditors “in most instances,” they said.

The latter did not, however, apply to companies in Richmond Smart’s industries division or in its Australian division if those companies were sold as going concerns as the managers intended. They were proceeding with an orderly realisation of assets, Messrs Watson and McDonald said. The time taken to assess the group’s position reflected the complexity of inter-relationships of its companies and the number of legal entities. Messrs Watson and McDonald have legal control of the

New Zealand companies of which there are 100 and management control of about 25 Australian companies by virtue of shareholding. There had been no fire sale of properties. To date some six properties have been sold for amounts totalling about $9 million. Currently there are 10 properties the subject of conditional contracts for amounts totalling approximately $42 million, with further properties under negotiation at around $22 million. Buyers from Asia, in particular Taiwan, have given strength to the property market in Auckland, but

the situation in Wellington, Christchurch and Dunedin is still depressed, the managers said.

The hotels division, which represents 9 per cent of the group’s assets, was initially offered for sale as a total operational group, but it soon became apparent that there was little buyer interest in the division as a whole, so it has now been split into three sections for individual sale. “This has attracted considerable interest,” the managers said. Industries division companies were trading profitably. The Australia Richmond Smart had a number of industrial companies owned by Hooper Bailie Industries in which Richmond Smart has a 90 per cent interest. This group is also operating profitably and there has been considerable buyer interest in it. Messrs Watson and McDonald said the group had about 2.4 million listed options on issue to the public. Each carries the right for the holder to acquire 1.85 ordinary shares in the company at an exercise price of 100 c. In view of the fact that the group is insolvent and its prospects are poor, it is not appropriate that the options be exercised, they said.