New Zealand finance company fails as credit crunch continues

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The Associated Press
Thursday, October 4, 2007

WELLINGTON, New Zealand: Clegg and Co. Finance was put into receivership Thursday, the tenth New Zealand finance company to collapse in the last 16 months, after it lost most of its shareholders' funds, a trustee said.

Nine local nonbank financial institutions have already failed after defaulting on debt payments as insecurity in global credit markets sparked by the U.S. subprime mortgage crisis spread to New Zealand. The nine firms have owed about 1.14 billion New Zealand dollars (US$798 million; €587 million), authorities said.

BDO Spicers has been appointed receiver after Clegg and Co. Finance told one of its trustees, the Covenant Trustee Co., that its cash deposits had been exhausted.

"In Covenant Trustee Company's view ... Clegg & Co. Finance has minimal if any residual shareholders funds," Covenant managing director Graham Miller said in a statement. Details of the losses were not immedfiately available.

A receiver is appointed to protect assets for the benefit of creditors.

Founded in April 2002, Clegg and Co. finances commercial plant finance leases and other secured lending contracts, according to the company's Web site.

New Zealand's central bank last month stepped in to boost liquidity in local money markets to help ease the credit crunch sparked by woes in the U.S. mortgage market.