A HUGE DEFICIT.

Otago Witness, Issue 3993, 23 September 1930, Page 10

A HUGE DEFICIT.

T. A. O'BRIEN'S INSOLVENCY.

DISCHARGE TO BE FACILITATED. AUCKLAND, September 15. Judgment for a debt of approximately £lOO was stated at a meeting of creditors to-day to have been the immediate cause of the bankruptcy of Thomas Alexander O’Brien, formerly picture theatre proprietor of Auckland, whose schedule showed total indebtedness of £240,257 and a deficiency of .£57,982. The advent of the “ talkies ” was stated by the debtor to be tire principal cause of his failure.' A committee of three was elected to cooperate with thg Official Assignee (Mr Walters) in the realisation of bankrupt’s principal asset, the Empire Theatre, edin. Assets were shown totalling £182,275, the interest in various theatres throughout the Dominion amounting to £152,475. but the interest in the Dunedin house was stated to be the only one likely to realise much for the unsecured creditors. The total liability included a mortgage of £205,000 covering the Civic Theatre in Auckland. A resolution that bankrupt's discharge should be facilitated was carried unanimously and several of the principal creditors paid a tribute to O’Brien’s business integrity. In the course of his statement bankrupt said that about 12 years ago he came to New Zealand under an engagement with the Fuller-Hayward Company in Wellington, and while with that company he occupied nearly every high executive position. He secured a lease of the Empire Theatre in Dunedin nine years ago, and was so successful that from time to time lie extended his business to include leases of some nine other theatres in Auckland, and also in tire South Island. These included the Palace and His Majesty’s at Blenheim, and Everybody’s and the Plaza, The Royal, The. Tivoli, The Rialto, The Britannia, and The Regent in Epsom. About Septeinber, 1925, it was decided to extend and rebuild the Empire Theatre in Dunedin to meet the challenge in that town where a new picture house was being built by J. C. Williamson, Ltd. For this purpose he gave a first mortgage of £BO,OOO to the Bank of New Zealand. secured over the whole of his business Sind personal assets, and guaranteed by two Aucklanders in consideration of his paying them 4 per cent, on the amount of the overdraft. About the time of the completion of this theatre, and before it could be re-financed, the Civic Square problem became an urgent one in Auckland. As most of his Auckland theatres were in the second class he decided it was necessary to have one high-class leading theatre as the nucleus for his other enterprises- in Auckland. With this object in view he approached the City Council and secured the greater portion of the Civic Square block. He then succeeded in procuring the aid of financiers in the city and a company was promoted to build the Civic Theatre. For the purpose of financing this company a mortgage was given by the company to the Bank of New Zealand over the company’s property, guaranteed by various shareholders and others, the guarantors taking a second mortgage over the whole of his assets. He intended to re-finance both the Empire Theatre at Dunedin and the Civic Theatre in Auckland in con-, junction with one of the largest theatrical interests in Australia, and negotiations were on the way in this direction when the crash in the Australian financial position completely killed all prospect of it. The cost of constructing, furnishing, and completing the Dunedin theatre came to some thousands of pounds more than was provided for, and this put an additional strain on his finances. The Civic Theatre cost a good deal more than was anticipated. but even though it now stood at a total cost of £200,000. it was the cheapest theatre of its size and class that had been built in Australia or New Zealand. The Civic Theatre Company in which he held a large number of shares was probably the soundest of any theatrical company in New Zealand. His interests in the theatre were, of course, mortgaged with his other assets, but there was every prospect of the equities becoming valuable by reason of the co-operative agreement recently arrived at by the Auckland theatres under which sound eeomony in many directions was resulting in much better profits. “ One of the main factors contributing to my bankruptcy was the advent of the ‘ talkies ’,” continued bankrupt’s statement. “ The installation of a ‘ talkie ’ plant is a very costly mattar, from £3OOO to £5OOO being required according to the size of the theatre. I succeeded in installing the ‘ talkies' in four of my houses, but this left me showing heavy losses in three or four theatres which were not wired for ‘ talkies.’ This proved to be a tremendous obstacle. I have since succeeded in having leases of the three unwired houses cancelled, and all further liability on my part terminated. Another factor was the action taken by the Commissioner of Taxes in levying land tax on a high scale on the combined value of the large number of theatre leases I held. This resulted in a claim for arrears of land tax of over £4090. With other theatrical people in Auckland I did not know until recently that the land tax would be assessed by the Government upon leasehold interests. “I would point out that virtually every big theatrical concern in New Zealand and Australia to-day is experiencing very critical times,” continued bankrupt. “ Notwithstanding the difficulties to which I have referred, I was, and am, still fully confident that, given time, I could have met all my obligations and paid all my creditors in full.” Bankrupt said that he arranged a meeting of his creditors in order to put the position before them, and at this meeting, held on August 13, 21 creditors, representing approximately 55 per cent, of his unsecured liabilities, agreed that he should be given two years in which to consolidate his position. It was arranged that a period of a fortnight should be allowed for other creditors to ascertain the wishes of their principals. Only two creditors, both for small amounts, had intimated that they would not agree to the suggested allowance of two years. On or about August 14 judgment was obtained against him by a creditor in Dunedin for the sum of approximately £lOO. The decision at the meeting was explained to the creditor, but he did not acknowledge the letter, and the bailiffs were put it?. la fairness

to his other creditors he had no option but to file his petition in order that steps could be taken to protect the asset of the Dunedin theatre for the benefit of his creditors as a whole. He was of the opinion that had this creditor agreed to fall in with the wishes of the major rity it would not have been necessary for him to file, and eventually all his creditors would have been paid 20s in the £l.

In a. further statement O’Brien said the Civic Theatre Company owned a lease of land from the City Council, and build.ing and chattels therein. This was mortgaged to the Bank of New Zealand under a floating debenture, the bank havr ing as security a syndicate of guarantors. His position was merely that of a sharer holder in the company. He had also indemnified the guarantors against loss, and to secure his indemnity he had give? them a second mortgage over all his assets. His shares in the Civic Theatre Company, both preference and ordinary, were mortgaged to Messrs O. Nicholson and E. R. Davies to secure an advance by the Bank of New Zealand. The sum advanced stood with accumulated interest at about £15,750. His Civic share§ amounted approximately to 14,700 prefr erence, and about 13,000 ordinary shares are fully paid up. He also had a liar bility to the company for some 3600 com tributing ordinary shares.