Delta #EpicFail Noble Subdivision : Gold Band Finance —The Little Finance Company that did (Delta).

Election Year : The following opinion is offered in the public interest. -Eds

Received from Christchurch Driver [CD]
Tue, 1 Mar 2016 at 4:17 p.m.

Your correspondent thought it useful to perform some financial excavation and unearth those precious first mortgage numbers that Graham Crombie and Mayor Dave Cull refuse to reveal in respect of the Noble Subdivision. They are the key to what Delta will eventually receive for its official $24M + debt on Noble. Your correspondent worked on the premise that if Delta is trying to hide something, it shouldn’t be too difficult to find at all. Your correspondent was not disappointed.

As they say in Delta out on the site, it was a good day, the ground was soft and the going was good. It didn’t take too long at all to get to the RL of the matter. (RL = Reduced Level…. excavator talk).

But inevitably, as is the fashion of these #EpicFail posts, there is evidence of continuing Delta stupidity, and yet another clumsy attempt to hide the facts from the ratepayers of Dunedin.

Your correspondent has long been curious about the first mortgagee at Noble Subdivision. Who they were, how much they were owed, what was their plan to exit out of this mess. Various entities had been mentioned in the media, but the company is Gold Band Finance. This is a tiny finance company : it has just $15.6M in TTA (Total Tangible Assets), and in August 2013 this one loan – in default – represented 21.30% of their total assets. Only 29% of the company’s lending is in property, and Noble was 70% of this. If Noble turned sour, this company was gone.

As it was, Gold Band breached their trust deed every year from 2009 until 2014 as a result of Noble, and twice had to pull its prospectus and not accept funds because the Trustee was so concerned about its position that it wouldn’t give Gold Band a waiver because the trust deed breaches were so serious.
(Memo To Delta Directors – Find that Trustee and appoint him as an auditor).

Gold Band then in August 2013 decided it needed to get most of this paralysed elephant off its back, so it could continue breathing and operating. Thus it sold part of its first mortgage debt…. to Delta.

Now the usual course of events is that when banks or finance companies are under pressure and want to sell distressed loans, they do so at a discount. That is, just as an example…. The face value is, say, a few million, the borrower is a deadbeat and hasn’t paid anything for years, the loan is in default and the neighbours are suing him for unconsented work (sound familiar ?). The seller would grab 50-60 cents in the face value dollar with both hands and “move on”, to borrow a term from the Cull lexicon.

Typically on land / development projects, a first mortgage will go no more than 40-50% of Loan to Value ratio (LVR) : But Gold Band had assessed the LVR at 71%, so even the first mortgage was far into the red zone. We will return to this in a later post.

From this, what a person of greater than room temperature IQ would say : “Dear Gold Band, I like the cut of your jib, the quality of your borrower and prospects of this mortgage. This (broken) mortgage is a bargain at full value ! Where do I sign ?!

This correspondent can hear the collective ratepayers’ prayer, “Do not say it… no, please do not say Delta paid full value” ….Readers, Delta did not pay full value. It paid more.

According to Gold Band’s public records, which are audited and thorough (Memo to Delta : Find those accountants and hire them also), the value of Gold Band’s Noble debt was 21.30% of TTA at August 2013. TTA in August 2013 was $17.3M. This meant a Gold Band Noble loan value of $3.73M. However, a curious thing occurred that same month. The loan value mysteriously jumped up to $4M. Gold Band smugly reported that after selling the $2.7M to Delta, “The loan amount was reduced from $4M to $1.3M in August 2013”.

Yes readers, once gain Delta lumbered into the Gold Band meeting room with a sign that said, “We’re desperate –please give us some security, we have money !” The concept that Gold Band were a very, very willing seller, that HAD to find a buyer appears to have escaped them completely. So while Delta have just further increased the amount of public funds at risk, Gold Band are sitting very nicely thank you. And while Delta and Graham Crombie think that interest is of no account, interest on the Gold Band $1.3M is accruing at an alarming rate : From August 2013 to August 2014 the capitalised interest grew the remaining Gold Band loan from the $1.3M to nearly $1.8M, an eye-watering 37% interest. It grew so much that the loan went back up to 11.30% of Gold Band’s TTA in August 2014. Entities associated with Gold Band Directors, Cup Investments Ltd and Opawa Garage Ltd then bought a further $1M off Gold Band to get the loan back into Trust deed Compliance. (Any one loan cannot be more than 10% of TTA). This correspondent can guarantee that Cup Investments capitalised penalty interest terms will be the same as Gold Band –or worse. At those rates, if Avanti is paid in say June 2016, then the Gold Band / Cup Investments piece of the first mortgage will have grown back from $1.3M to over $3.1M !!!

Your correspondent understands that Gold Band are tough operators. For them, dealing with DCC / Delta was the equivalent of shooting fish in a barrel.

It is clear reading the Gold Band information that Noble has been a near-death experience for them. But unlike Delta, they have been clear and transparent and credible in their reporting. I learnt more in a hour from Gold Band than all of Dunedin has learnt in a year from the obfuscations and dissembling of Messrs McKenzie, Cull, Crombie and others.

However, that is not the end of this story. There was another curious wrinkle with the $2.7M Delta deal where Gold Band laid down a very important marker to yet more Delta directorial manipulations that look to have just one purpose : to avoid public scrutiny.

Gold Band reported that it had entered into a deal with Delta to purchase $2.7M of its loan, but the notes to the financial reports show that in fact it was both AVANTI SECURITIES and Delta that purchased $2.7M of security. Delta in fact paid Gold Band $1.1M, and paid Avanti $1.5M. Cr Vandervis questioned if Delta in fact paid Gold Band $1.5M, and paid Avanti $1.5M and never received an answer. Mayor Cull instructed that this and other questions did not need to be answered (Council meeting 22.2.16). Your correspondent has that sinking feeling that something VERY STRANGE is occurring, particularly when we remember that chief executive Grady Cameron confirmed that Delta had spent $3.3M not $2.7M “strengthening its position”. This correspondent thinks there is strong probability that Avanti were asked / approached by Delta to take $1.5M of face value of the $2.7M, in order that Delta wasn’t left with the majority of the loan, which this correspondent understands would then have to be reported in Delta’s annual accounts. Delta then deposited funds into Avanti.

Finally, and most horribly, your correspondent thinks that a lot (or all) of the remaining $600,000 of the $3.3M Delta spent “strengthening its position” is likely to be front end prepaid interest (or some sort of other fee) paid by Delta to Avanti to cover the interest on $1.5M that Avanti have advanced to Gold Band. If the interest rate is roughly in line with the Gold Band rate of approx 37% per year, the $600,000 would provide around 18 months of interest cover to Avanti.

In summary, Delta have now enabled opportunistic finance firms to feed at the trough of DCC public funds. Delta looks to have misused ratepayer funds in an effort to engage in financial engineering to hide what they are doing.

Warren Larsen’s report was scathing of Delta’s earlier attempts to do this on the Luggate subdivision. It is incredible that Delta would attempt this again.

Tomorrow’s post will continue with an examination of what is really happening with the mortgagee sale.

Stay tuned, and braced with cups of tea. Tomorrow’s news is not good.

Related Posts and Comments:
● 29.2.16 Delta #EpicFail Noble Subdivision : NBR interested in bidders
● 28.2.16 Delta #EpicFail Noble… If I were a rich man / Delta Director
● 27.2.16 Delta #EpicFail Noble Subdivision Consent : Strictly Optional
● 27.2.16 Delta #NUCLEAR EpicFail —Noble Subdivision : Incompetent…
● 25.2.16 Delta #EpicFail: Mayor Cull —Forced Sale Fundamentals 101
● 24.2.16 Delta #EpicFail —Noble Subdivision: Cameron, Crombie & McKenzie
● 23.2.16 DCC: DCHL half year result to 31 December 2015
19.2.16 Delta: Update on Yaldhurst subdivision debt recovery
15.2.16 Delta / DCHL not broadcasting position on subdivision mortgagee tender
30.1.16 DCC Rates: LOCAL CONTEXT not Stats —Delta and Hippopotamuses
● 29.1.16 Delta #EpicFail —Yaldhurst Subdivision ● Some forensics
● 21.1.16 Delta #EpicFail —Yaldhurst Subdivision
21.1.16 DCC LTAP 2016/17 budget discussion #ultrahelpfulhints
10.1.16 Infrastructure ‘open to facile misinterpretation’…. or local ignore
15.12.15 Noble property subdivision aka Yaldhurst Village | Mortgagee Tender
21.9.15 DCC: Not shite (?) hitting the fan but DVL
20.7.15 Noble property subdivision —DELTA #LGOIMA
1.4.15 Christchurch subdivisions: Heat gone?
24.3.15 Noble property subdivision —DELTA
23.3.15 Noble property subdivision: “Denials suggest that we have not learned.”
17.3.15 DCC —Delta, Jacks Point Luggate II…. Noble property subdivision

● 14.5.14 (via DCC website) Larsen Report February 2012
A recent governance review of the Dunedin City Council companies was conducted by Warren Larsen.

● 20.3.14 Delta: Report from Office of the Auditor-General
Inquiry into property investments by Delta Utility Services Limited at Luggate and Jacks Point

█ For more, enter the term *delta* in the search box at right.

Posted by Elizabeth Kerr

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21 Comments

Filed under Business, Construction, DCC, DCHL, DCTL, Delta, Democracy, Design, District Plan, Dunedin, Economics, Geography, Infrastructure, Name, New Zealand, People, Politics, Project management, Property, Resource management, Site, Town planning, Travesty, Urban design

21 responses to “Delta #EpicFail Noble Subdivision : Gold Band Finance —The Little Finance Company that did (Delta).

  1. Gurglars

    The only worse news for Dunedin citizens is that Gold Band Finance was or is in some way directly or indirectly connected with Delta directors past or present. The knife would be right in the back and no King Arthur to pull it out.

  2. Elizabeth

    It’s worthwhile having CD lay out Christchurch findings in a series of posts here, in easy-to-read style. Readers don’t need a background in finance to understand where this is going, especially in regards to ratepayer funds. There are surprises, to keep the teapot hot.

    Once again, hope Whatiffers are saving posts and relevant comments in their own archives, by copy and paste or screenshots – printing out is another method. Make sure you include the dates of publication provided with each item. Screenshots take no paper and provide the most efficient proof/storage.

    Lastly, Christchurch power players are more forthcoming than Dunedin’s. Why is this?!

  3. Calvin Oaten

    CD obviously has a deep insight into the dealings in this, possibly the biggest developing scandal in the DCC. Christchurch Driver of course doesn’t necessarily mean he is not local. Either way, it is not important, as the story is the essence. Crombie, McKenzie, Cull and Cameron must be having nightmares as this steady dripping of chapter and verse is akin to Chinese water torture for them. They can’t predict this form of disclosure, let alone combat it. This is real theatre and ‘Whatiffers’ are loving it.

  4. russandbev

    I can well imagine Cull, Crombie and Cameron choking on their collective dinners over these revelations. Hopefully other Councillors are also reading with increasing determination to take action. Seems to me vital that as many people as possible apply pressure/ form groups to take civil action.

    • Elizabeth

      russandbev – did you read this from Gurglars on another thread (today):

      [excerpt] I have written to the Ombudsman requesting that the office investigates Delta’s “investments” in Jacks Point, Luggate and Yaldhurst and in particular where there are cross director’s interests.
      https://dunedinstadium.wordpress.com/2016/02/27/delta-epicfail-noble-subdivision-consent-strictly-optional/#comment-71010

      and this, also Gurglars (today):

      I spoke to an esteemed member of the legal profession today and the minimum cost for a lawyer to peruse such a case would be in the order of $100,000!
      The real negative if persons were to do the legwork is that should the case be lost, then the applicant would have costs awarded against them.
      The DCC and Delta would at ratepayers cost obfuscate until the applicants ran out of time, money or patience, so cost would be inevitable without a money tree.
      His suggestion was an application to the local government ombudsman to investigate the thefts and inadequacies of Delta management and directors. By theft I mean theft by incompetence or as it is oft described “Larceny by trick”.
      https://dunedinstadium.wordpress.com/2016/02/27/delta-epicfail-noble-subdivision-consent-strictly-optional/#comment-71003

    • Hype O'Thermia

      Dream on! Cull as usual will go lalalalalala, sit down, don’t show me, take that tablet away, I’ve never read that, it’s not there, it’s all lies, LEAVE THE BUILDING! NO, MAKE THAT LEAVE THE COUNTRY – won’t he? And with all unpleasant matters decisively dealt with and the ODT’s Chris the Intrepid Boy Reporter filing something snitty about Cr Vandervis, Crombie and Cameron can relax again. Nothing to see here.
      It’s business as usual in Dodgy City.

  5. Rob Hamlin

    That’s a staggering piece of analysis. I will look forward to the sequel. The tragedy is that it will be very difficult to take civil proceedings against the Delta directors as (as far as I know) only shareholders can bring a civil case against directors – and even then it’s not common. Unfortunately the ratepayers are indirect guarantors to DCTL under the MOVRNF, not shareholders in Delta.

    However, with stuff like this presented to them, I would be interested to see our Councillors’ excuses for not going to law, especially our beloved Chair of ‘Finance’. I have no doubt that they will have one.

    As I understand that they check this site regularly, I also await the Mc.P. ‘spoiler’ article with interest.

  6. Elizabeth

    Engaging with government – Complain to the Ombudsman

    If you can’t solve a problem with a government agency, you can complain to the Ombudsman.

    Before making a complaint you should try to resolve it with the agency first.

    [ Like that would work at DCC/DCHL/Delta – Councillor(s) recently shut down by Mayor Cull (council meeting 22.2.16 – watch video )]

    Complaining to the Ombudsman

    The Ombudsman can investigate complaints about:
    • central government agencies eg IRD
    local government agencies eg councils
    • crown entities eg district health boards, NZTA
    • tertiary education institutions eg wānanga, universities
    • school boards of trustees
    • state owned enterprises eg KiwiRail, NZ Post.

    █ More at https://www.govt.nz/browse/engaging-with-government/complain-about-a-government-department/complain-to-the-ombudsman/

  7. russandbev

    Just watched the video of the meeting. It was a shameful display by Cull who exhibited all the traits of a control freak. The ODT in not reporting what actually happened are just as bad.

    • Diane Yeldon

      Excellent effort on some part of the DCC (management, I suppose) to get this meeting video online only six days after the meeting while it’s still topical. (I suppose they might have been doing this before and I just haven’t noticed.)

    • Peter

      Russell. People who start to become control freaks are actually exhibiting signs they are losing control as they try to shore things up. I hear from the inside chaos reigns within the DCC with a mixture of inertia and slap dash decision making.

      • russandbev

        What stood out for me in this video apart from Cull’s inept handling of the meeting itself were that most of the Councillors were like stunned mullets not saying anything. Kate Wilson only wanted a reason to shut down the questioning and that was the only contribution that she made, Jinty Mactavish inbetween the ums was disjointed and nothing of any substance was said, Hilary Calvert appeared cowed by Cull and Lee Vandervis had some really pertinent questions which were shut down immediately. Crombie didn’t really want to speak and when he did just kept repeating the mantra of independent analyst and auditor rubbish and Grant McKenzie gave the impression of not wanting to reveal too much. Cull was nothing other than a bully and his hatred for Vandervis and Calvert shone through like a beacon. His admiration for Jinty was also evident backing her generalist comments to the hilt. Clearly this Council is largely dysfunctional and the more that is revealed re the shady fiasco in Yaldhurst, the greater the dysfunctionality. In the meantime, the normal business of Dunedin goes on and the ratepayers go further down the gurgler.

  8. Elizabeth

    ODT 1.3.16 (page 8)

    ODT 1.3.16 Letter to editor Attwooll p8

  9. Hype O'Thermia

    Delta’s modus operandi seems like joining a dating site:
    Rich (handbag chocker with OP’s credit cards), thick as pigshit, been around the block a few times without learning anything, no sense of responsibility, hot to trot with Nigerian scammer for fun times, merging/splurging assets.

    *responsibility

  10. Elizabeth

    So what is ODT doing on Delta now ?
    NO SPACE

    Sounds like Mayor Cull – you don’t have to answer that.

    The REAL NEWS SPACE is LESS at print ODT due to copious advertising spreads that I never read, this as Mon-Fri issues grow thinner. Most of the larger Saturday paper goes straight to BIN.

  11. Diane Yeldon

    As far as ODT is concerned, online ‘space’ is infinite. If they really wanted to report, they could put in-depth stuff online and print a link in their print edition. Yes, Cull is consistently a bad chair, playing favourites and displaying bad temper and making exactly the kind of personal remarks and attacks that he finds so offensive in others. Seems incapable of remembering Standing Orders too.

  12. Hype O'Thermia

    When he first stood for council I heard from someone who appeared to be well-regarded as a truthful man, that Cull had been a bullying landlord neighbour, work on his rental property damaging the other person’s garden. Attitude: arrogant, not apologetic, not wishing to make good or compensate. Described as a bully, a jerk.
    It ties in with what we’re seeing now, a basic character type, plus situations that require both courage and integrity, result as described by unfortunate neighbour of rental property.

    • russandbev

      Exactly what I heard from a person that I have admired for many years and whose opinion I respect. It ties in with an email that I once received from the man which was both deeply offensive and arrogant – I do have some interesting emails on file….

  13. Christchurch Driver is great, in the style of ‘Fendalcia Purr’ (Avenues) and The Ferret (Metro), but over important matters. Hey, is she Ali Jones? Is she, well, actually Elizabeth?

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