During the past year, Fund Managers Canterbury Limited continued the work of realising outstanding loans for repayment of investors in the Canterbury Mortgage Trust Fund (CMT), in consultation with the Trustee, which contracted an experienced third-party recovery consultant to manage the realisation process.
As at 31 March 2012, a total of $202.5 million had been repaid, equating to 80.5c in the dollar (excluding any tax refunds that may accrue to investors).
Events to date
Investors will recall that in June and July 2008, the Fund began receiving a large number of withdrawal requests. This was in effect, a “run on the bank”. Although the Fund held a prudent cash reserve to meet withdrawals in the ordinary course of business, it was apparent the Fund would not be in a position to meet the increasing level of withdrawal requests as they fell due. This was because the Fund’s investments were in secured first mortgages that would be difficult to realise at short notice. To protect the Fund from this unprecedented level of withdrawals, the Fund Manager suspended all withdrawals, making the effective date for their payment March 2009.
To ensure all investors would be treated equally, on 11 February 2009 with the consent of the Trustee, the Fund Manager resolved to wind up the Fund. This was so all investors could be repaid on a pro rata basis as assets were realised, which would avoid the situation of the investors who had made the initial withdrawal requests being preferentially repaid.
At the time the winding-up began in 2009, the effects of the Global Financial Crisis which began in early 2008 were being sharply felt in New Zealand. A sluggish economy, the demise of a number of finance companies, and a soft property market would make it difficult for many of the Fund’s borrowers to refinance so that they could repay the Fund when their mortgages were called up. When the Fund took possession of properties after a borrower defaulted, the soft property market in turn made it difficult to sell. Because all of the Fund’s first mortgage lending was on the basis of registered valuations and relatively low loan to valuation ratios with the approval of Trustee, this has resulted in recoveries being higher for the Fund and its investors when compared with other funds where these precautions did not exist.
So far 80.5% of investment funds held at the date of suspension have been repaid to investors. Depending on their tax status within the Fund, some investors may have received up to a further 2.5% and others may have been able to receive a tax refund within their own tax return process. With further funds returned as the remaining loans are recovered.
On a more positive note, during the last twelve months, there have been some loans where there have been recoveries above the written down values and we are hopeful that trend might continue as the remaining loans are realised and there is continued improvement in the economy and confidence in the property market.
We are determined to get repayment of these last 22 loans. They are the most difficult and time-consuming to recover, but please be assured we are still strongly pursuing their recovery.
The annual accounts are currently being audited and will soon be distributed with a report outlining the current position.
A number of investors have drawn our attention to the lack of regular newsletters about the progress of the winding up. This gap in communication results from having not much news to provide to investors at this stage of the winding up, along with the significant cost of mailing a newsletter. We recognise investors do want better communication, so we have decided to establish this modest website (www.cmt.co.nz) where information (including financial statements) will be available for both investors and the media. There is on-going media interest in the progress of the winding up, but as explained to a number of reporters, sometimes we cannot be as forthcoming as they at least would wish about the status of individual loan recoveries. This is due to privacy considerations, or the involvement in complex negotiations where publicity around CMT’s intentions could disadvantage investors’ interests.