A second private Dunedin investment and finance company is in liquidation, owing almost $8.5 million to more than 50 mainly southern investors and creditors, with possibly almost 60% of the amount owed unrecoverable.
While the liquidators say the secured and preferential creditors of Hurricane House Ltd will likely be repaid in full, a final figure stating how much investors and creditors will be repaid has not been made available yet.
Initial estimates stated there may be deficit of up to $4.8 million, over half the amount owed.
Hurricane House was placed in the hands of liquidators by its sole owner, Dunedin businessman Paul Nicholson, in mid-February and the first report by Dunedin-based Insolvency Management has been delivered.
Mr Nicholson is sole director and the only shareholder in Hurricane, and is also the sole director and shareholder of Edinburgh Finance Ltd, which Hurricane formerly traded as.
Gus Jenkins of Insolvency Management said: "The company has several large defaulting loans with borrowers.
The portfolio is small in its numbers of borrowers, with one loan accounting for about 50% of the portfolio."
When interviewed yesterday, Mr Jenkins stressed while the initial report estimated $4.84 million may be the final deficit for creditors, there were several investigations to be completed before a final figure would be available.
The placing of Hurricane House in liquidation follows Dunedin boutique company All Purpose Finance, which traded as St Kilda Finance, being placed in the hands of receivers by its management in mid-November, owing about $6.93 million to 358 mainly southern investors.
A receivers' report has estimated the eventual payout to St Kilda creditors, as its loan book assets are sold, will range from 45 to 80 cents in the dollar, or a total of $3.1 million-$5.52 million.
Mr Jenkins said Hurricane's main asset was its loan book, but the "largest loan, and several others, are in default" and lawyers were attempting to negotiate a variety of settlements.
An unnamed Hurricane investor was scathing of Mr Nicholson's management and fee structure in an email to the Otago Daily Times, claiming some Hurricane investors could lose their homes.
Of the 25 Hurricane investors caught up in the liquidation, more than 60% are from Dunedin, while among the 25 creditors, about half are from Dunedin.
Hurricane's bank is owed $348,000 as a secured creditor, preferential creditors IRD and employees $22,700, unsecured trade creditors $84,600, unsecured investors creditors $4.26 million and unsecured investor creditors associated with Mr Nicholson $830,000.
Unsecured loans associated with Mr Nicholson total $2.93 million.
"At this early stage of the liquidation, we are unable to provide an estimate of any expected return to creditors and investors of Hurricane," Mr Jenkins said.
However, it was "likely" there would be funds available for an unspecified dividend to be paid to unsecured creditors, he said.
Furthermore, there were at least five issues Mr Jenkins was working through which required "further investigation".
There were a "number" of assets described as "investments", including shareholdings in a publicly listed company on the secondary market and "loans to entities associated with the director [Mr Nicholson]".
To be investigated further was the value of the company shareholding and loans to the "associated entities" as part of the restructuring of companies associated with Mr Nicholson, where funds were channelled through Hurricane House.
"It is not yet known what level of recoveries will be releasable from investments and the account receivable," Mr Jenkins said.
Also being looked into was a loan of $3.01 million to the Mornington Family Trust, of which Mr Nicholson is a trustee, which was used as a "conduit" to purchase Hurricane shares by various shareholders.
There was an account receivable which had not been paid for what "appears to be management fees" totaling $1.12 million to companies associated with Mr Nicholson as part of more restructuring, Mr Jenkins said.
Lastly, Mr Jenkins will be looking into a loan of $214,929 made to Mr Nicholson, "over a period of time". Of investor funds, more than $830,000 had been invested in Hurricane House by "an entity associated with" Mr Nicholson, Mr Jenkins said.
There was $1.65 million in paid-up share capital, $245,000 cash in banks, along with long-term liabilities of $2.9 million in loans to Hurricane by companies associated with Mr Nicholson, Mr Jenkins said.
An informal meeting for all creditors and investors is scheduled for March 20 in Dunedin. It was not known how long the liquidation process would take, Mr Jenkins said.
