Money Managers Action Group

Orange Insurance was another disaster waiting to happen.

As per usual, related parties such as Citrus Holdings Limited, Matrix Finance and other Money Managers offshoots have profited from lending on marginal investments.

Meanwhile, the investors have been left with a rotting corpse of a company.

It has proved difficult to get firm information about the level of repayment likely to be made on behalf of Orange Insurance .
However the Liquidator, Laurie Chilcott of Accru, Smith, Chilcott Limited, has advised recently that the prospects of those who invested in Orange Insurance losing the bulk of their capital (and probably also the accrued interest) are high.

We understand the key facts to be as follows:

1. Doug Somers-Edgar (DSE) put Orange Insurance Limited (OIL) into Voluntary Administration on 30 October 2008. (It was placed in liquidation on 29 September 2009.)

2. On 30 October 2008 approximately 120 Bond Holders were owed $7,369,628.

3. Theoretically, these funds were ’secured’ mainly by advances made to six borrowers. (The projects for which advances were made included a coastal development at Mangawhai, a townhouse complex at Whitianga, and a South Auckland residential development.)

4. For one advance ($420,991) OIL was the single first mortgagee; for the balance of the advances OIL was either a first mortgagee ranking equally along with other first mortgagees ($3,060,040), or a second mortgagee ranking behind other first mortgagees ($3,725,375). (In some cases OIL was in competition for repayment with other Money Managers stable lenders such as Orange Finance.)

5. On 30 October 2008 all but one of the borrowers were in default. Since then, lenders who rank ahead of OIL have negotiated new loan agreements for two of the loans; one borrower has been placed in receivership.

6. The agreement for each of the six advances provided that the interest payable would be capitalized (added to the amount borrowed). This means that the amount owed to lenders that rank equally with or ahead of OIL is increasing continuously; it also means that OIL is not receiving even interest payments from defaulting borrowers.

7. Since OIL was placed in liquidation (23 September 2009) the Liquidator has been able to arrange for the Public Trust to make over the funds held in an OIL Trust Fund, for the IRD to make a tax refund, and for one of the borrowers to repay the relevant first mortgage.

8. The Liquidator used these funds to make a 12.363 cents in the $ to all bondholders. (For unsecured creditors who are not bondholders the distribution was 5.00 cents in the $.)

9. The Liquidator has advised that it is highly unlikely that he will be able to make further distributions in the near future. It is possible that sales in the South Auckland residential development may pick up in a year or so, but OIL’s claims on any revenue produced will rank well below those of the major first mortgagee (a Bank), particularly after allowing for capitalized interest and similar prior charges. The prospects of the other developments (notably the Mangawhai and Whitianga projects) producing income for OIL in the foreseeable future are bleak.