Provincial Finance Limited (in Receivership)

Update on the Receivership of Provincial Finance Limited

9 June 2006

The receivers of Provincial Finance Ltd (“Provincial”), John Waller and Maurice Noone, partners at PricewaterhouseCoopers, today provided an update to debenture holders on the process of determining the financial position of Provincial while potential restructuring options are explored.

The receivers provide below a summary of the draft unaudited Statement of Financial Performance for Provincial for the year ended 31 March 2006, as prepared by Provincial’s management. This shows a net loss before taxation of approximately $54 million for that period.

Table 1: Draft Unaudited Statement of Financial Performance

NZD $000			31-Mar-06
			12 months
			Unaudited
Operating revenue			78,708
Expenses
Bad debts			33,253
Interest			26,473
Net increase in provision for doubtful debts			52,458
Operating expenses			20,889
			133,073
Net loss before taxation			(54,365)
Taxation *1			(18,058)
Net loss after taxation			(36,307)

Note: *1 Future potential tax benefit from losses generated in the 2006 year.

In addition, the Receivers provide a summary of the draft unaudited Statement of Financial Position for Provincial as at 31 March 2006, also prepared by Provincial’s management. This is set out below.

Table 2: Draft Unaudited Statement of Financial Position

NZD $000			31-Mar-06
			Unaudited
Assets
Deposits with trading banks			31,631
Taxation refunds due			5,590
Prepayments & sundry receivables			1,796
Loan advances *1		323,453
Provision for bad / doubtful debts		(60,293)	263,160
Property, plant & equipment			5,722
Other investments			26,373
Deferred Taxation			17,531
			351,803
Liabilities
Current liabilities			4,564
Debenture stock *2			323,932
Bank term loan			2,145
			330,641
Net assets *3			21,162

Note: *1 Loan advances comprise approximately 28,000 loans.
Note: *2 Debenture stock holders comprise approximately 14,000 investments.
Note: *3 Excluding preference shares which are included as part of equity of the Company.

John Waller said the ‘other investments’ which formed part of Provincial’s assets primarily comprised of a 77% interest in Tasman Pacific Insurance Ltd. “We are currently reviewing this investment and obtaining an independent valuation of this company,” he said. “However it seems likely that there will be a reduction in its book value which will result in a further reduction in Provincial’s net assets.”

He said there were indications that changes in the company’s provision for doubtful debts may also be needed. “We’re undertaking further work in this area, but any increase in the existing provision of $60 million contained in the unaudited draft management accounts will further erode Provincial’s net assets.”

John Waller also said it was important to note that the realisation of the deferred taxation asset of $17.5 million was not guaranteed. “This amount is dependent on Provincial generating future profits,” he said.

Recovery Plans

The receivers are in discussions with Provincial’s shareholders, a number of industry participants, and others in relation to a proposed restructuring plan for the company.

John Waller said that any plan would take some time to develop. “We intend to keep all debenture holders fully informed of any progress in relation to this.”

He said it was too early to advise on the potential outcome for debenture holders. “The final result is dependent on a number of factors – most importantly the quality of the loan book and its ultimate recovery.

“There has been some speculation on the likely returns to debenture holders. At this stage it is anticipated debenture holders will recover most, if not all, of their investment over time. As the likely level of recovery from the loan book becomes clearer, so too will the likely returns to debenture holders.”

While further investigation of the loan book is being undertaken there will be no repayment of principal or payment of interest to debenture holders. However, John Waller was pleased to announce that an interim distribution to debenture holders is being planned for the end of September 2006, but added that it was too early to advise the quantum of this distribution.

NOTES FOR EDITORS

1. Contact
For all media enquiries please contact PwC's communications Manager, Sarah Howison:
Tel: +64 9 355 8703
Mob: +64 21 820 3784
Email sarah.h.howison@nz.pwc.com

2. Website
For information in relation to the receivership of Provincial Finance Ltd and its related companies, please visit
http://www.pwc.com/nz/ProvincialFinance

3. About PricewaterhouseCoopers: PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice. (“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.)