Prometheus Finance, the Wellington-based finance company with a mandate for socially responsible lending, has called in receivers after failing to raise enough capital to support plans to scale up the business without breaching regulated capital requirements.
The finance company wanted to raise $3.7 million in new capital to cover forecast losses and give it enough funding to scale up the business with increased lending while maintaining its capital adequacy requirement. It failed to raise the funds needed, and appointed PwC's John Fisk and Jeremy Morley as receivers last Wednesday. Fisk and Morley anticipate the 1,300 debenture and deposit holders owed some $21 million will get most of their money back, with Prometheus holding $16.5 million in cash and $6 million in loans.
"We'll be writing to investors hopefully before Christmas to let them know what the position is," Fisk said. "They should get a very big chunk of it back but the final outcome will depend on the recovery of the loan book."
Prometheus saw itself in a strong position to capture opportunities from New Zealand's social investment market, and its board decided to boost lending with wider margins in an effort to turn a profit within three to four years, requiring new capital, according to its Sept. 3 prospectus for a sale of debt securities.
"This is an ambitious plan and not without risks. The directors believe that Prometheus's established position as a social lender in New Zealand will enable it to raise the additional equity within the required time frames and in the amounts required to become viable in the longer term."
That would have enabled Prometheus to write bigger loans while staying within its capital adequacy, though ultimately it fell short, meaning the firm would have been at risk of breaching its trust deed in the near future.
"Our market is not used to these sorts of guys. it's more popular over in Europe. banks think of them as charities and charities think of them as banks," Fisk said.
As at March 31, the lender's biggest sector concentrations were in social and environmental housing with $1.54 million in loans, and schools and adult education at $1.06 million. About 0.3 percent of repayments were in arrears by more than three months.
Environmental lobbyist Greenpeace of New Zealand was one of Prometheus's investors, reporting a $957,868 investment with the lender as at Dec. 31, up from $920,649 a year earlier, Greenpeace board member Noel Josephson was also a director of Prometheus, according to the lobbyist's 2013 accounts.
Greenpeace accounted for the investment in its cash at hand balance, recognising that "Prometheus is not technically a bank and may therefore expose GPNZ to a higher level of risk than if the funds were held in a registered bank."
