Strategic Finance Ltd last night froze redemptions of its secured debenture stock and subordinated notes in recognition of a further deterioration of the New Zealand property finance sector.
In the middle of last month, Australian owner Allco HIT announced a consortium including senior management was planning to buy Strategic Finance.
The board had agreed indicative non-binding terms with the consortium, which also included BOS International, a subsidiary of Halifax Bank of Scotland, to sell Strategic Investment Group, the parent of property company Strategic Finance.
The sale, expected at the time to take two months to complete, was subject to due diligence, binding agreements and Allco shareholder approval.
BOS International would also increase its existing wholesale funding facility in Strategic Finance to $150 million, lessening the reliance on debenture funding.
In a statement to the NZX, after the market had closed, Strategic chief executive Kerry Finnigan said the board understood that in addition to a change of ownership the transaction would involved a capital restructure.
"This will require consideration by Strategic's security holders of debenture stock, subordinated notes and perpetual preference shares.
While the negotiations have been continuing, there has been a further material decline in the property finance market sector and reinvestment rates."
To allow those matters to be concluded, and to protect the position of the security holders, the Strategic board had suspended the redemptions and stopped accepting subscriptions for debenture stock and subordinated notes, he said.
ABN Amro Craigs broker Chris Timms said the debentures were the top-ranked securities followed by the subordinated notes.
The preference shares were "hanging in the wind" with no security.
"The issue going forward is the concern for the ranking of all of those should there be a management buyout."
