‘Suspicious transaction’ revealed in Du Val Cabinet Paper

Monday, 30 September 2024

Lawyer lays out Du Val investors' woes

A Cabinet Paper recommending Du Val enter statutory management says the property developer was in a “precarious position”.

An attached Financial Markets Authority letter calls one of the Du Val company’s transactions “suspicious”.

Other areas of concern include “Du Val” being removed from some subsidiaries and replaced with names like “Orange Pineapple Ltd”.

A Du Val company made a “suspicious transaction” that did not appear to make “commercial sense”, a Cabinet Paper released on Monday has revealed.

Du Val Property Group, and associated companies, entered receivership on August 2 and, subsequently, statutory management 19 days’ later. More than 70 entities are subject to the management.

The Cabinet Paper, prepared by the office of Commerce and Consumer Affairs Minister Andrew Bayly, stated the Du Val entities have approximately $250 million in liabilities.

It reveals Du Val’s “precarious position, with various creditors for differing entities who may act soon” as part of the rationale for the statutory management.

Do you know more about the Du Val story? Are you affected? Email nick.truebridge@stuff.co.nz

Kenyon and Charlotte Clarke’s Du Val Property Group entered receivership on August 2 and, subsequently, statutory management.

“Receivers have already been appointed by some creditors over certain entities – in particular the China Construction Bank (NZ) over the Du Val Build to Rent fund – and liquidation proceedings have been begun with respect to others,” the paper stated.

Attached to the paper is a letter from the Financial Markets Authority (FMA), which outlined concerns about Du Val’s solvency.

For example, the Du Val Mortgage Fund had lent out all investor money and also ceased distributions to investors in 2022.

Separately, the letter stated Du Val’s Build to Rent Fund defaulted on a $17.8m payment to China Construction Bank, which had appointed its own receiver. Du Val was also reportedly in ongoing discussions with subcontractors owned for work, which resulted in a liquidation application.

The FMA further pointed out Du Val renamed many of its subsidiaries with “random names like Orange Pineapple Ltd, Flipping Lids Ltd and Woodle Ltd”.

Commerce Minister Andrew Bayly confirmed in August Du Val would enter statutory management.

The core Du Val businesses were listed by the FMA as being Du Val Group NZ, Du Val Mortgage Fund, Du Val Build to Rent and Du Val Property Group.

In relation to Du Val Group NZ, the FMA identified its main asset was $15m in intellectual property purchased from Kenyon and Charlotte Clarke’s trust.

“This appears to be a suspicious transaction and does not appear to make commercial sense,” the FMA wrote.

The FMA reiterated issues with an offer for Mortgage Fund investors to convert their investment to shares in Du Val Property Group.

“The receivers have expressed concern about what investors knew about that transaction before agreeing to transfer into the Property Group to save any value that they thought they had,” its letter stated.

According the Cabinet Paper, Du Val’s creditors included about 120 to 150 investors, home buyers, commercial lenders, subcontractors, the IRD, a vendor financier, and other construction services and goods suppliers, according to the paper.

Statutory management was “very rarely recommended” and was used for “complex corporate failure where ordinary rules of law and insolvency cannot deal with the problem”, it added.