Provident receivers hopeful of restarting debenture payment by Christmas

The receivers and managers of Provident Capital have told debenture holders they are hopeful of restarting the flow of payments in the next few months, but they should not expect a full refund of their investments.

An information session for debenture holders was held by receivers and managers of Provident, PPB Advisory, yesterday in Sydney - telecast to Melbourne, Brisbane, Adelaide and Perth.

It was attended by around 120 mainly small investors in Sydney – many of them pensioners who rely on small interest payments of around $300 per month to supplement their pensions.

They have not received a payment in over two months.

Joint receiver and manager Phil Carter from PPB Advisory told Property Observer loans in the fixed-term interest portfolio have a face value of $108 million while Bendigo Bank also lent $70 million to Provident to fund lending.

Bendigo Bank is the first-ranking creditor and must be repaid its $70 million first before the receivers can start paying money back to debenture holders.

Under current projection, based on the best-case scenario of loans being repaid as they fall due, PBB Advisory would begin to restart payments to debenture holders around Christmas time.

However, Carter says PPB Advisory will be looking to speed up the process as much as possible to start payments earlier.

PPB Advisory has also delayed taking any fees until such time as debenture holders start receiving payments, while Bendigo Bank has agreed to allowing PPB Advisory to act as "de facto" on itsloan portfolio, thereby avoiding a duplication of receivers' fees.

Carter says when PPB Advisory was appointed on July 3 it found the fixed-term interest account in a “mess”.

The Bendigo Bank portfolio is a lot healthier because Provident loaned under the prudential oversight of the bank, which among other things placed limits on loan sizes (a maximum of $2.5 million).

However, Carter says Provident acted as lender of last resort when it came to using funds from debenture holder funding 42 loans, which have a principal balance outstanding of $108 million.

Of this $108 million, $100 million of loans are in arrears.

“Of the 42 loans funded from the fixed-term interest fund, 19 were already in mortgage in possession when we walked in 3 July,” Carter says.

Seven of the largest loans ($5 million or more) account for nearly 60% of the portfolio, and all are mortgagee-in-possession.

“They are in a variety of states, some are holes in the grounds, some have development applications that have expired,” says Carter.

The biggest loan of $22.4 million is for a Queensland development, for which Provident has been mortgagee-in-possession for four years.

Provident was also mortgagee-in-possession for at least 18 months or more on all the $5 million-plus loans.

Analysis by PPB Advisory suggests properties securing three of the five largest loans in the fixed-term interest porfolio likely to be downgraded further.

At the information session, PPB Advisory said it would start preparing a monthly dashboard style report on its website to keep individual debenture holders informed of updated information, "including forecast distributions in the next three months, distributions to date, a snapshot of the outstanding portfolio, and other relevant matters".

It expects to hold a further update meeting with debenture holders later this year.