Computer Discovery
July 21st, 2007 by admin
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Lombard: six loans made up 65% of loan book
Here's the 20-20 hindsight on Lombard Finance A quick post mortem on the default yesterday by Lombard Finance on NZ$127 million of debentures and secured notes gives plenty of material for 20:20 hindsight. Lombard's comments that it defaulted because of a "systematic failure of an industry" have been ridiculed by industry observers who have pointed to Lombard's own very specific weaknesses. Here's a few pointers that close observers would have seen in its accounts and court records. Problems specific to Lombard included: * Having almost 30% of its loan book tied up in one loan to property developer Tim Manning of NZ$40 million for the troubled Brooklyn Rise project in Wellington. That one loan was worth almost double the entire group's equity. * Having almost 60% of its loan book in 6 loans * Having bought mortgage broker Tasman Home Loans from Blue Chip Investments last year * Having expanded its operations and loan book very quickly, including purchasing the NZ$250 million United Home Loans book from Hanover Finance * Having its Chief Executive Michael Reeves and its then Chief Financial Officer Alan Beddie convicted in December 2006 for misleading investors and fined NZ$37,000 over a contributory mortgages scheme. See here for more details on the convictions. The official notice of the convictions is here in notes 35 and 36 on the MED's website. Beddie resigned shortly after the conviction. * Having a contributory mortgages operation with bad debts of almost a third of the NZ$100 million loan book. Investors were still hunting for compensation for losses of NZ$7 million as recently as January 2005. Industry observers said Lombard was often at the end of the line in property development projects where property investors who had been rejected by banks and other finance companies ended up doing mezzanine finance deals with Lombard. Lombard's default will be a major blow for almost 5,000 investors who had believed its advertisements to "Invest Wisely" and who had trusted the blue-blood board that at one time included three former National Party cabinet ministers, including current Chairman Sir Douglas Graham and current director Bill Jeffries. Colleague Hugh Templeton was also a director until he resigned last year.
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