Consumer urges caution for Geneva investors

MEDIA RELEASE 17 October 2007

Consumer urges caution for Geneva investors

Investors waiting on repayment from Geneva Finance should be asking Geneva’s management some tough questions.

Geneva’s proposed six and a half month moratorium on repaying debenture holders poses a difficult choice for investors. “It’s hard for ordinary investors get to grips with the pros and cons of the proposal and agree with it or elect to call in the receivers,” said Consumer CEO Sue Chetwin.

“What guarantees are there that investors will get their money back in six months’ time? With Geneva’s downgraded credit rating it looks even riskier now compared with when they first invested.”

Geneva’s Standard & Poor’s credit rating has been downgraded to D from a slightly higher B+ a month ago. Even a B+ is rating is sub-investment grade.

Investors will be asked to vote on the scheme at a meeting on 5 November. Those attending should be looking for strong evidence that Geneva can trade its way out of difficulty.

“Investors are really making a decision about the quality and credibility of Geneva’s management team”, Chetwin said.

“To establish some of this credibility, we’d like to see the directors and owners of Geneva putting their money on the line and increasing their equity in the company. If they’re so sure they can turn the company around, they would also stand to benefit. Debenture holders aren’t getting any increased benefit – they are just getting back their initial investment, Chetwin said.

The alternative of calling in the receivers is just as unpalatable for investors, but if that was the case secured investors are likely to get at least some of their money back over the coming months.

“People concerned about investing in finance companies and seeking to understand how credit ratings really work can visit www.consumer.org.nz Chetwin said. The latest issue of our magazine has a seven-page special on investments including what to look for in finance companies.

A website specialising in educating fixed-interest investors is being launched by Consumer in November, she said.

The site has been built for Consumer subscribers, but will be free to all visitors for a limited time.

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