How to lose $22m in 6 months

George Kerr has a reputation for being an astute dealmaker and the following is based on the assumption that it was him and Bryan Mogridge behind the dealing at PGC and Torchlight. Your board under the leadership of Bryan Mogridge is double backing and he is contradicting himself, which ultimately cost PGC shareholders and arm and a leg.

Greg Bright's old article on George Kerr

Link contributed by a reader...

Financial firepower – why van Eyk’s new backer can fuel lasting growth

 van Eyk, the most influential research firm in the financial planning market, has a new cornerstone investor following the departure of the company’s namesake. GREG BRIGHT reports on the new-look van Eyk and the major shareholders’ plans for sustained growth. Mark Thomas has a new partner at van Eyk and, more importantly, he has the catalyst and firepower for some big changes to how his business is run and the firm’s continue

Ratatat-tat -- Another one

It was pointed out to me that until recent events Heartland New Zealand's largest shareholder was Pyne Gould Corp and the fourth largest shareholder is Pyne Holdings. Focus on the corporate structure below.

1. Pyne Gould shares were held by Torchlight Securities (TS), which is 100% owned by Pyne Gould Corp (PGC).
2. Pyne Gould owns only 10% of Torchlight Fund LP1 (LP1)
3. Pyne Nominees is 100% beneficially owned by George Kerr and owns 9% of  LP1 and Mogridge has a direct stake in LP1

It is interesting to note that the money which I assume is being raised to plug the hole in LP1, which was funded by the loan from the cash fund is raised not by selling Kerr's shares in Heartland held through Pyne Nominees, but by selling PGC's Heartland shares held through TS. You would have expected the Heartland shares to at least have been sold down in equal amounts spread between Pyne Nominees and PGC.

Surprised?

Cheerio!
jA
Anderson Cooper once said, I think it's a good thing that there are bloggers out there watching very closely and holding people accountable. Everyone in the news should be able to hold up to that kind of scrutiny. I'm for as much transparency in the newsgathering process as possible.

Bryan Mogridge, "(it) would be foolish"

Lord Francis Jeffrey said, “A good name, like good will, is got by many actions and lost by one“ or maybe it is more appropriate in this case to say, actions speak louder than words. 

Shareholders of PGC struggle to reconcile many things of which most are listed on this blog. It is up to the Board and will be to everyone’s benefit if it would clarify these apparent contradictions. So can the Board please step up and communicate with its shareholders? 

The general feedback we are getting is that the attempt by Bryan Mogridge on 4 May 2012 in his Letter to Shareholders is woefully inadequate. Not one person has said that they deem that communication to be adequate; something for Mr Mogridge to consider. 

Bryan Mogridge

The latest action, a few weeks ago on 17 May, throws up yet another apparent contradiction by Bryan Mogridge and as always we invite him to publicly clear it up.

Kerr’s Torchlight to come under scrutiny from the Australian Takeovers Panel

Note that in light of the following, a copy of the Wilton Capital letter, which we blogged about here, was also sent to the Australia Takeovers Panel.

Monday 13th February 2012

George Kerr’s Torchlight Investment Group, a subsidiary of Pyne Gould Corp which specialises in squeezing value from underperforming assets, will come under scrutiny from the Australian Takeovers Panel after issuing ASX-listed RCL Group with a notice to review its debt facility....the article continues here 

Easy pickings

The first bit of news is that AEP has been able to mop up enough shares to get to 63.68% of PGC's shares. It has been explained to us that it is also now time to hatch that which has been counted or put another way, pay for those shares. It has always intrigued us that never was funding mentioned or even asked about by investors who are handing over their shares. Although one can put it down to pure speculation the analysis that we've seen suggests that with $150m here and $150m there, soon you are talking real money. With a business structure as convoluted as this and debt behind debt, like this,  it might not be so simple to fork out the twenty odd million. What seems like a pittance in the world of Kerr/Darby/Baker Street might turn out to be what breaks the camel's back.

Kerr/Darby sale of EPAM (Equity Partners Asset Management) to PGC

The story goes that, in 2009, Kerr sold EPAM to PGC for $18m. However, as with most things surrounding Kerr it's always the tiki tour instead of the straight and narrow. EPAM was originally owned by Lambton Partners Ltd, a vehicle of which the directors are both Darby and Kerr. Before EPAM was sold to Perpetual Asset Management (PAM), it was first sold to Equity Partners Asset Management Holdings Limited (EPAMH), which was renamed Claymore Financial Services Limited one month after the deal and Claymore is owned by Lambton Partners (yes that is correct), which is again owned by Budfin Nominees Limited. The latter is a vehicle of Kerr’s favorite law firm, Buddle Findlay. As you might expect all inquiries will end here with a, “Sorry mate, we cannot talk about that. Attorney-client privilege thingie you know”. So to simplify, Lambton sold EPAM to EPAMH, which sold it to PAM, subsequent to which EPAMH was renamed Claymore, which is owned by Lambton. Our take is that the spoils did not fall to Kerr alone, but to Kerr and Darby, via Lambton.

We cannot figure out what Kerr & Darby paid for EPAM, but we can tell whether they got a good price or not.

We know from the official announcement that they got paid $18m and that EPAM only managed EPIC at the time, which had a £61.96m/$158m of investments (point 59).  So if you use the numbers used by Baobab in its valuation of PGC then the industry rule of thumb of 2 pct to 3 pct of AUM should apply and on $158m Kerr and Darby should have been paid $3m to $5m. So they made out like bandits at 11.4 pct of AUM ($18m/$158m) and we would assume that they at least doubled their money and probably even more than that. We have to wonder out loud though. Where were the independent directors Bruce Irvine, Bryan Mogridge and George Gould??? Oh that's right, they approved the deal!

As an interesting side note. If the independent directors, Bruce Irvine and Bryan Mogridge, were as willing to value the Van Eyk, Perpetual and Torchlight management contracts on the same basis as they were willing to value the management contract (EPAM) of EPIC when they bought it off their fellow director and company shareholder Kerr and his friend Darby, instead of using the multiples that Baobab and Grant Samuel used in their valuations then you will end up with the following.

	AUM	Value at 11.4% of AUM
Van Eyk AUM of $1.9 billion times 38%	$722m	$82m
Perpetual	$600m	$68m
Torchlight	$141m	$16m

The $166m is more than double the current market cap of the entire PGC and 4-5 times the value put on it by Baobab and Grant Samuel. The deal worked out great for Darby and Kerr, but is a stinker for PGC shareholders and we grade it an F on corporate governance. 

 

Now my dear Kiwis, let’s not get despondent. Find a wall, bang your head against it three times and repeat after me, NZ is the most transparent country in the world, NZ is the most transparent country in the world, NZ is the most transparent country in the world then bang your head three times and repeat after me…