Capital + Merchant Finance Limited (In Receivership and In Liquidation)

Update 30 June 2010
Following our last update, we have now completed realisations on all loans existing at the date of receivership.  To date we have realised $96.1million from the companies’ assets and made payments of $87.3million to prior charge holders, which is made up as follows:

	M$
Fortress	61.4
Other prior Charge holders	25.9
Total	$87.3

Following this, if Fortress was on the same priority ranking as the public debenture holders, the recoveries paid to investors in Capital + Merchant as a percentage of total debt is 26 cents in the dollar.

Fortress is currently owed $2.32 million by Capital + Merchant Finance and we are hopeful that these monies will be repaid from the proceeds of insurance claims by the end of 2010.

We are continuing to pursue recoveries under the Lloyds insurance policy and are experiencing difficulty with a number of loans where technical policy requirements were not adhered to prior to the date of receivership. We are continuing our efforts to make recoveries and cannot reliably estimate expected recoveries (if any) at this time. We have made an application for summary judgment in respect of various premium refunds from the brokers and the underwriters.

The Securities Commission has laid charges against directors of CMF; the court process will take its course in this regard.  The SFO is continuing its investigations into potential actions against certain of the directors.  The Official Assignee is also investigating as to whether there are any actions that they may wish to pursue.  An investor is taking action against Perpetual and CMF.

As the recoveries of the loans are now complete, the only additional recoveries expected (if any) are those under the insurance policy and possible actions against third parties. Due to the weaker economic climate and poor quality of the loans, realisations from the loans were much lower than initially expected.  As a result, we expect recoveries to debenture holders to be $nil from the assets of the company.  In our view, the only recoveries for debenture holders will be from insurance claims and any legal claims against various parties.

Contact: Tim Downes, Joint Receiver, Grant Thornton New Zealand Ltd, (09) 308 2989