18,000 investors stand to lose half a billion dollars.
Many Bridgecorp investors knew of risks: analyst (AM) Related Story: Bridgecorp collapse a 'wake-up call' for financial services With the full extent of this week's collapse of the Bridgecorp property group yet to become apparent, it has emerged that many investors were at least partly aware of the company's problems and knew the risks they were taking.
Investment analysts in New Zealand had long regarded Bridgecorp as a ticking time bomb - simply because its troubled property ventures particularly in Australia and Fiji have been disclosed in prospectuses.
But about 18,000 investors on both sides of the Tasman who did not heed the fine print now stand to lose half a billion dollars.
One veteran analyst who had flagged the Bridgecorp risk is Brian Gaynor of Milford Asset Management, and he spoke with our business editor Peter Ryan.
"A lot of investors were very much aware, but mainly I guess equity investors," he said.
"[But] it seems that the fixed interest investors were disconnected. They didn't seem to pay any attention to the company's share price, which was indicating that Bridgecorp was at risk and it did have some problems.
"So it was only the mum and pop investors who put their money into Bridgecorp, who didn't seem to understand that a low share price was indicative of a company that had problems."
Bridgecorp's interest rate wasn't actually that much more than what you would get by going with a traditional bank. Is that surprising?
"No, well that's certainly a characteristic in New Zealand, where one could argue that Bridgecorp's interest rates were very low given the risk.
"You know, the prospectus had pretty full disclosure. I've got to say that if one is critical of Bridgecorp, one can't be critical of its level of disclosure.
"One would've thought, given that, investors would have demanded much higher interest rates, but they were quite willing to invest in the company, which had well-identified problems at pretty low interest rates, not that much above what the major banks were offering in New Zealand.
"Admittedly, the disclosure was quite complicated, but if one read through the prospectus it was all very clear. But it does seem that most people just didn't pay much attention to it."
Any thoughts about the level of bad news creditors could receive at the meeting next week?
"We are aware of probably up to 15 per cent of the company's assets, which are going to be very difficult to get back.
"Given the fact that only 30 per cent of Bridgecorp's lending was secured against first mortgages, one would imagine that there will be more bad news as well.
"So I don't think investors will get an awful lot of very positive news next week."
