Dorchester to end its moratorium

The company, which has paid 35% of the amount owing under the deferred repayment plan for its finance unit, hopes to put the full details of an offer to investors before Christmas which would see total cash repayments of 50 cents in the dollar, ownership and control of Dorchester-owned hotels including the proceeds of any sale with operating returns, and a three-year interest bearing note to debenture holders.

Dorchester estimates these would realise between 87% and 91% of investors' principal, and the company's board said it's well placed to "become a vehicle for the finance industry consolidation only now starting to occur."  

The Treasury and Reserve Bank have separately said they expect further failures in the finance sector, and The Treasury increased its provisioning for the retail deposit guarantee scheme $35 million to $863 million in the three months ended September. Some 73 institutions are covered by the guarantee, with deposits totalling $124.3 billion, of which $5.5 billion is in the non-bank sector.   

"The intention is that the settlement with debenture holders would be agreed in February 2010 and effective at 30 June 2010," said executive director Paul Byrnes in a statement. "One of these conditions would be a capital raising of a minimum $10 million undertaken in April or May 2010 to provide adequate shareholder funds for a restructured Dorchester business."  In August, Byrne told shareholders at the company's annual meeting that settling with debenture holders was one of four practical steps the company could take to come through the moratorium successfully, though he was confident of being able to come out the other side after he convinced investors to waive interest over the three year period.