The company is at risk of breaching the minimum 8% capital adequacy ratio set by the Reserve Bank and, if it does, Covenant Trustee is likely to appoint receivers.

Holders of $4.4 million of subordinated notes will vote on March 31 on converting every $1,000 face value of their notes to 20,000 shares at an assumed five cents per share issue price.

Geneva shares last traded at five cents.

If no other new shares were issued, noteholders would then hold just over 50% of Geneva's shares

However, debenture holders, most of whom are already shareholders too, are also being asked to covert some or all of their next scheduled $4.9 million principal payment, due March 31, into shares on the same terms.

While 75% of noteholders have to vote in favour for the conversion to proceed, independent expert Northington Partners says noteholders are unlikely to receive anything under receivership or an alternative wind-down scenario, even if the business performs significantly better than expected.

Since November 2007, Geneva has been operating under a moratorium agreed to by investors. In May 2008, noteholders agreed to covert 55% of their holdings to shares at a nominal 34.5 cents per share.

In March last year, noteholders voted to extend the repayment period on their remaining notes beyond April 30, 2015. Noteholders were promised then they would receive all their capital plus 13.2% annual interest.

Northington complained the limited scope of its terms of reference didn't allow it to address several factors noteholders should consider including alternative options available to Geneva, the short-term prospects for Geneva's shares and the ability to sell Geneva shares and the likelihood Geneva will achieve its medium to long-term plans.

Geneva directors say converting the notes to equity will save about $587,000 a year in interest as well as materially diminishing the prospect of breaching the Reserve Bank's capital adequacy ratio. "While there can be no assurance of the future value of the shares, the directors believe that the share price will rise once the company returns to profitability."

Link to Northington Partners report:
http://file.nzx.com/000/471/4757471.pdf

Link to Geneva Finance prospectus:
http://file.nzx.com/000/475/4757475.pdf

Link to Geneva Finance letter to subordinated noteholders:
http://file.nzx.com/000/473/4757473.pdf