It was blindingly obvious to some
By VoV | Vestar | Tuesday 18th May 2010An article in Saturday’s Herald titled “Recession over the hump and wasn’t so bad after all, Sir Robert says” quotes Bob Jones as saying…
“Naturally the downturn wiped out the developers as downturns always have and always will, and in turn, wiped out thousands of mums’ and dads’ savings through dumb finance company lending to those developers.
“Aside from stupidity, the salient reason for this disaster was the imbalance which arose when finance companies found cash inflows easy and sensible lending options scarce. So they increased their high-risk lending to developers in the absence of other options. It’s an age-old cynical, cyclical pattern which will repeat itself within a decade.”
It’s obvious to us investors now that the reason finance companies found cash inflows so easy was the likes of Vestar who aggressively pumped our money into them.
We investors didn’t know those finance companies were involved in high-risk lending to developers in the absence of more sensible lending options, but supposed experts such as Kelvin Syms, Donal Curtin, the other members of Vestar’s investment committee and their fleet of investment advisers must surely have known.
It’s obvious that Bob Jones not only knew, but sees it as a natural cycle. He correctly says that downturns have always wiped out developers. I don’t understand how Vestar could be so ill-prepared for an *inevitable* recession.
Were they ill-prepared, or were they motivated by a need to keep the earnings up following the sale to MFS? Was there an earn-out clause that withheld a portion of the purchase price and made it dependent on future earnings? I don’t know the answers to these questions, but hopefully it will come out in Lawrence Herzog’s court case.
Tags: Donal Curtin, Kelvin Syms, Vestar
Thursday 20th May 2010 at 6:09 am
There were warnings being made throughout the industry – the Vestar promoters and other advisory companies were self indulgent for self gratification. There was little in their self serving mandate that gave way for any security of investors money.
The problem now is that the Authorities have not done their job and still allow high profile (and low profile) money launderers to roam the world on your money.
Friday 28th May 2010 at 1:26 pm
The NZ Herald today quotes Professor David Mayes, the new chair of finance at Auckland University Business School, as follows:
Mayes says the fact so many finance companies have failed is not surprising as they invested in funds either too risky for banks to invest in, or banks didn’t want to invest in them.
A lot of finance company collapses occurred before the global financial crisis, which shows New Zealand “was ahead of the curve on this one”, but any company that indulges in risky finance gets into trouble when the economy turns down, Mayes says.
Another person to whom it was blindingly obvious.