2 Apr 2020

Finance company FE Investments Limited goes into receivership

5:47 pm on 2 April 2020

The New Zealand finance company FE Investments Limited (FEIL) has gone into receivership and all payments of principal and interest to deposit holders have been suspended.

A screenshot of the FE Investments Limited website today.

A screenshot of the FE Investments Limited website today. Photo: RNZ

FE Investments is a relatively small non-bank deposit taking finance company with $54.3 million in retail investments.

The majority of the company's 617 investors are individuals, rather than trusts and other entities. Eighty-four percent of its investors are based in New Zealand.

The company made the announcement on its website this afternoon.

"The Receivers will shortly write to all known deposit holders advising them of the receivership and the likely next steps. Further communication with deposit holders will likely be in May 2020, when the Receivers will provide further information about FEI and the receivership," the announcement said.

Late last year the Reserve Bank said it was monitoring the state of affairs at the firm amidst doubts of its financial strength.

The firm's rating had been downgraded by Standard and Poors global and queries had been made by the Australian stock exchange, however at the time it said its finances were fine.

In a statement to the ASX the company's parent company - Australian-owned FE Investments Group Limited - said its subsidiary had been engaging with its trustee for a number of weeks in relation to necessary adjustments to its provision for loan losses.

"On March 31 FEIL advised the Reserve Bank of New Zealand and its trustee, that as a result of making necessary provisions against its loan book, FEIL anticipated breaching its required 8 percent capital adequacy ratio.

"By letter dated April 1 [the trustee] advised FEIL that it had formed an opinion on reasonable grounds that the proposed capital raising had no reasonable prospects of success, that FEIL was not able to remedy the breach within the next 14 days and that as a result it intends to immediately exercise its powers of enforcement… and appoint a receiver."

Financial Markets Authority director of regulation Liam Mason said it was terrible news for investors.

"FE Investments has been in difficulty for some time following a number of business setbacks. Its problems were not caused by Covid-19, but there's no doubt the current economic conditions have made matters worse," Mason said.

"The FMA has been engaging with the company since late last year to ensure it was disclosing its situation accurately, and has been liaising with the company's supervisor, Trustees Executors Limited in regard to its oversight of the company."

The FMA encouraged investors to contact Korda Mentha, who have been appointed as receivers.