Ann: MEETING: GFL: Special Meeting

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GFL
16/07/2013 12:45
MEETING

REL: 1245 HRS GFNZ Group Limited

MEETING: GFL: Special Meeting

GFNZ GROUP LIMITED
Notice of Special Meeting

Notice is given that a special meeting of shareholders of GFNZ Group Limited
(Geneva) will be held at Amway of New Zealand, 6a Pacific Rise, Mt
Wellington, Auckland on 31 July 2013 commencing at 2pm.

SPECIAL BUSINESS

To consider and, if thought fit, pass the following resolutions:

Resolution 1 - Group restructure and securitisation
Resolved pursuant to NZAX Listing Rule 9.1.1 and section 129 of the Companies
Act 1993 that the shareholders approve the transfer from Geneva of all of its
assets and liabilities to the following transferees on the terms described in
the explanatory notes to this notice of meeting and on such other terms and
conditions as the directors determine:

- certain receivables with an aggregate book value of approximately
$23,500,000 selected by the directors, directly or indirectly (via an interim
transfer to Geneva Financial Services Limited) to the trustee of a
securitisation programme arranged by Westpac New Zealand Limited (Westpac);

- other receivables to be transferred in the future to the trustee of the
securitisation programme in accordance with the terms of the programme;

- other receivables with an aggregate book value of approximately $1,500,000,
to Geneva Financial Services Limited;

- all other receivables with an aggregate book value of approximately
$13,000,000, to Stellar Collections Limited; and

- all other assets with an aggregate book value of approximately $2,000,000,
to Stellar Collections Limited and to Geneva Financial Services Limited, to
be allocated to each company as the directors determine.

Resolution 2 - FedPac loan
Resolved pursuant to NZAX Listing Rule 9.2.1 that the shareholders approve
the advance to Geneva of up to $7,500,000 by Federal Pacific Group Limited
(or one of its wholly owned subsidiaries) on the terms described in the
explanatory notes to this notice of meeting.

Resolution 3 - Directors' loans
Resolved pursuant to NZAX Listing Rule 9.2.1 that the shareholders approve
(a) the loans to Stellar Collections Limited of $2,500,000 in aggregate, by
David Smale and Robin King, both directors of Geneva, and any Associated
Person (as defined in the Listing Rules) of either of them, and (b) the
unsecured guarantee by Geneva of those loans, in each case on the terms
described in the explanatory notes to this notice of meeting.

EXPLANATORY NOTES
1 Procedural matters

Majority required
Resolution 1 is a special resolution.  Resolutions 2 and 3 are ordinary
resolutions.  To be passed, a special resolution requires at least 75% of the
votes of shareholders entitled to vote and voting on the resolution to be
cast in favour of the resolution.  To be passed, an ordinary resolution
requires more than 50% of the votes of shareholders entitled to vote and
voting on the resolution to be cast in favour of the resolution.
Quorum
The shareholder's meeting will proceed if at least 5 shareholders having the
right to vote at the meeting are present in person or by proxy.
Exercise of votes
On a show of hands, each shareholder has one vote.  On a poll, each
shareholder has one vote for each share held.
Voting of jointly held shares
If your shares are jointly held, only the vote of the shareholder whose name
appears first in the register of shareholders will be counted to the
exclusion of the other joint holder.
Voting by corporations
In order to vote at the meeting (other than by proxy), a corporation that is
a holder of shares must appoint a person to act as its representative.
Proxies and Representatives
You may exercise your right to vote at the meeting either by being present in
person or by appointing a proxy to attend and vote in your place. A proxy
need not be a shareholder of Geneva.  You may appoint the chairperson of the
meeting to be your proxy.  If you do not indicate how the chairperson will
vote, the chairperson will vote in favour of the resolutions.  A body
corporate shareholder may appoint a representative to attend the meeting on
its behalf.
A proxy form is enclosed with this notice of meeting.  If you wish to vote by
proxy you must complete the form and send it to Link Market Services Limited,
so as to ensure that it is received by 2pm on Monday, 29 July 2013.  Details
of where to send the completed proxy form are set out in the voting
instructions attached to this notice of meeting.
Voting Restrictions
Under NZAX Listing Rule 9.3:
- Federal Pacific Group Nominees Limited and any shareholder of Geneva who is
an Associated Person (as defined in the NZAX Listing Rules) of it, is not
permitted to vote their shares in Geneva on resolution 2; and
- David Smale and Robin King, and any shareholder of Geneva who is an
Associated Person of either of them, are not permitted to vote their shares
in Geneva on resolution 3.
Disqualified persons may not act as a discretionary proxy but may vote in
accordance with express instructions of a shareholder who is not disqualified
from voting.  David Smale will be the chairperson of the meeting.
Accordingly, if you intend to appoint the chairperson as your proxy, you must
indicate how the chairperson should vote on resolution 3 since David Smale is
not permitted to exercise discretionary proxies in respect of that
resolution.
Listing Rules and Companies Act
Geneva is listed on the NZAX market operated by NZX Limited, and must comply
with the NZAX Listing Rules.  In addition, various provisions of the NZAX
Listing Rules are incorporated in Geneva's Constitution.  The Companies Act,
Geneva's Constitution and the NZAX Listing Rules contain specific
requirements which are relevant to the proposed resolutions set out in this
notice of meeting.  These requirements are addressed in these Explanatory
Notes.
2 Background to all resolutions
Geneva's directors have secured a series of committed funding arrangements,
which are scheduled to settle contemporaneously subject to the condition
precedent as set out below, and which, if completed, will allow Geneva to
repay all of its debentures, its banking facility with BOS International
(Australia) Limited and the funding raised under its professional investor
schemes (the Existing Funding Facilities).  Repayment of the Existing Funding
Facilities will result in the release of Geneva from its moratorium entered
into in 2007.

The condition precedent referred to above is that on the repayment date of
the Existing Funding Facilities, Geneva has sufficient new funding to exit
moratorium. This is a key condition, as for example, if for any reason any
one of the New Funding Facilities (described below) does not settle and
Geneva is unable to exit moratorium, then none of the New Funding Facilities
will settle.

As at the date of this notice of meeting, the total principal amount of debt
outstanding under all of the Existing Funding Facilities is $27.8 million.
In order to repay this debt, Geneva has arranged the following new funding
facilities (the New Funding Facilities):

- Secured loans aggregating $2,500,000 from David Smale and Robin King (both
directors of Geneva) to Stellar Collections Limited (see resolution 3).

- Secured loans from a number of professional investors to Stellar
Collections Limited totalling up to $1,000,000;

- A back-up facility from a financial institution, should any of the above
loans not settle.

- A secured loan from a professional investor to Pacific Rise Limited of
$1,500,000.

- An unsecured loan from Fedpac to Geneva of up to $7,500,000 of which
$5,000,000 is available to repay the Existing Funding Facilities and up to
$2,500,000 may be available in the 24 months following repayment of the
Existing Funding Facilities for the purpose of funding the growth of Geneva's
business (see resolution 2).

- A $30,000,000 securitisation program arranged and funded by Westpac under
which Geneva will initially raise approximately $17,500,000 (see resolution
1).

The balance required to repay the Existing Funding Facilities, and the
establishment costs associated with this transaction will be funded by
Geneva's existing cash on hand.

Resolution 1 - Group Restructure and securitisation
Further background to resolution 1
In March 2011 Geneva's shareholders passed a resolution approving the
transfer of all Geneva's receivables to its wholly owned subsidiaries Geneva
Nominees Limited (under its former name Geneva Finance NZ Limited) and
Stellar Collections Limited.  This resolution was passed to enable a group
restructure to take place.  That proposed group restructure involved five
steps as follows:

(i) Geneva Finance Limited being renamed GFNZ Group Limited;

(ii) GFNZ Group Limited forming a new wholly owned subsidiary Geneva Finance
NZ Limited (now called Geneva Nominees Limited);

(iii) GFNZ Group Limited transferring its receivables and its other assets to
one of two of its subsidiary companies, the then newly incorporated Geneva
Finance NZ Limited or Stellar Collections Limited;

(iv) GFNZ Group Limited becoming a holding company with no assets other than
investments in its subsidiaries; and

(v) GFNZ Group Limited having four direct subsidiaries:

- Geneva Finance NZ Limited (now called Geneva Nominees Limited);

- Stellar Collections Limited (with this company having a subsidiary Stellar
Collections No 2 Limited - now called Geneva Financial Services Limited);

- Quest Insurance Group Limited; and

- Pacific Rise Limited.

Steps (i), (ii) and (v) were completed.  Steps (iii) and (iv) were not
completed.

The directors now wish to complete the group restructure since, in order to
establish the New Funding Facilities, a portfolio of loans must be
transferred to the trustee of the securitisation trust (see below for
details) and the remaining receivables of Geneva must be transferred to
Geneva Financial Services Limited and Stellar Collections Limited.  In
addition, all other assets of Geneva (such as computers, furniture and office
equipment and fittings) will be transferred to Stellar Collections Limited
and Geneva Financial Services Limited as the directors determine.

These asset transfers will result in Geneva becoming a holding company only
with its assets being shares in, and loans to, its subsidiary companies.

Following is the group structure after the transactions detailed in this
notice of meeting have been implemented.

GFNZ Group Limited
   - Geneva Financial Services Limited
   - Stellar Collections Limited
   - Quest Insurance Group Limited
   - Geneva Nominees Limited (no assets)
   - Pacific Rise Limited

Securitisation
Under this facility Geneva will be able to raise up to $30,000,000 of new
funding.  The principal terms of the securitisation facility are as follows:
- Certain of Geneva's finance receivables will be sold to a securitisation
trust for cash at a purchase price equal to the face value of the receivables
at the time of sale.  These receivables will need to meet parameters which
have been agreed with Westpac. It is expected that existing receivables with
a face value of approximately $23,500,000 will meet the parameters and will
be the initial transfer of receivables to the trust.  As new receivables are
generated by Geneva making new loans to its customers, further tranches of
receivables will be transferred to the trust.

- The trust will pay for the purchase price of the receivables by borrowing 2
loans:

(i) A revolving loan facility from Westpac of up to $30,000,000 with interest
payable monthly in arrears. The initial facility term is 2 years with Geneva
having the right, within 9 months from the expiry of the term, to request an
extension of the facility.  If Westpac grants an extension, the facility term
will be extended by 12 months. Geneva will have the right to continue to
request annual extensions until such time as Westpac declines a request.  If
Westpac declines to extend its loan facility, Geneva will have 9 months in
which to arrange a replacement facility in order to repay Westpac on expiry.

When the facility term expires (at 24 months or as extended), the facility
will be repayable and if not repaid, Westpac may at its discretion elect to
enforce its security, or use cashflows received from receivables in the Trust
to repay its facility. Once Westpac is repaid in full, the cashflow received
from loans sold to the Trust will be used to repay Geneva's subordinated
loan. Westpac's security is limited to the receivables held by the Trust.

The outstanding principal amount of the Westpac facility at any time must not
exceed a percentage of the book value of the receivables held by the trust.
The percentage will depend on the nature of each receivable sold - for
example there are different percentages for motor vehicle loans and
commercial loans.  Geneva expects, based on its current mix of receivables
and its intended future business, that the Westpac loan will be approximately
75% of the book value of the receivables sold to the trust.

(ii) A subordinated loan from Geneva, the amount of which will be the balance
of the purchase price of the receivables sold to the trust - ie approximately
25% of the purchase price.

- The trust will receive all the repayments of principal and interest made by
borrowers under the receivables sold to the trust.

Within the term of the trust these cashflows will be applied monthly in
payment of the trust's liabilities in an agreed order (known as a
"waterfall") which first requires the payment of the trust's taxes, then
certain of the trust's operating costs, then Westpac's monthly interest, then
Geneva's monthly interest due to it on its subordinated loan, with the
residual income being payable to Geneva Financial Services Limited.  As noted
above once the facility term expires, cashflows will also be applied to
repayment of the outstanding principal amount of Westpac's loan facility.

No repayment of principal of the subordinated loan will be made until Westpac
has been repaid in full.  Geneva and Geneva Financial Services Limited have
an obligation to ensure that each receivable sold to the trust meets the
agreed eligibility parameters at the time that the receivable is sold to the
trust and provided this obligation is met, neither Geneva nor any other group
company will have any obligation to make up any shortfall if the cashflows
received by the trust are insufficient to cover the loan repayments due to
Westpac.  Geneva and Geneva Financial Services Limited will also have no
obligation to Westpac if a receivable subsequently ceases to meet the agreed
eligibility parameters.

Once the Westpac loan is repaid, Geneva Financial Services Limited will
receive all the repayments of principal and interest made by borrowers under
the receivables sold to the trust.

- An independent party will be the trustee of the securitisation trust.
Geneva will continue to manage the collection and servicing of the finance
receivables sold to the trust in the same way that it presently carries out
those functions.

The net commercial effect of the securitisation is that Geneva has the
ability to borrow approximately 75% of the value of its receivables which
meet the agreed parameters, subject to the maximum amount borrowed not
exceeding $30,000,000. The outstanding amount borrowed is only repayable out
of the cashflows received on the receivables sold to the trust.  Neither
Geneva nor any other group company will have any obligation to pay any money
to the trust or Westpac if the loans sold to the trust do not generate
sufficient cashflow to repay Westpac in full except to the extent any
receivable sold to the trust did not meet the agreed eligibility parameters
at the time of sale.

Geneva bears the risk of all losses from the receivables sold to the trust up
to the amount of its subordinated loan.  However Geneva currently bears this
risk as owner of those receivables (and currently the amount of its possible
losses is not capped).

Requirements for resolution 1.
Resolution 1 is required by NZAX Listing Rule 9.1.1 which provides that an
issuer such as Geneva cannot enter into a transaction to sell assets in
respect of which the gross value is in excess of 50% of its average market
capitalisation except with the prior approval of a special resolution of its
shareholders.
Additionally Resolution 1 is required by section 129 of the Companies Act
which provides that a company must not enter into a transaction to dispose of
assets the value of which is more than half the value of all the company's
assets before the disposition, unless the transaction is approved by a
special resolution of its shareholders.
Since Geneva is transferring all of its assets, the value will clearly exceed
the thresholds set by NZAX Listing Rule 9.1.1 and section 129 of the
Companies Act.
3 Resolution 2 - Approval of loan from Federal Pacific Group Limited
Further background to resolution 2
Federal Pacific Group Limited (FedPac), which is Geneva's largest shareholder
holding approximately 37% of its shares, has agreed to advance a term loan to
Geneva of $5,000,000 and has indicated that it may advance a further
$2,500,000, all on the following terms and otherwise on normal commercial
terms:

Amount:   Up to $7,500,000

Term: 3 years

Establishment Fee: 1.25% of the amount to be advanced

Interest rate: 11.0% per annum with interest paid quarterly in arrears

Repayment:  In one lump sum on maturity

Security:  Unsecured

Purpose: $5,000,000 to repay the Existing Funding Facilities and up to
$2,500,000 to fund the growth of Geneva's business

The directors consider that the interest rate and term and the fact that the
loan is unsecured are favourable to Geneva and more favourable to Geneva than
a loan available on similar terms from an arms-length financial institution.
As required by NZAX Listing Rule 9.2.5(b), the directors have issued a
certificate stating that in their opinion the FedPac loan is fair and
reasonable to Geneva's shareholders and in the best interests of Geneva.  A
copy of that certificate accompanies this notice of meeting.

Requirement for Resolution 2
Resolution 2 is required by NZAX Listing Rule 9.2.1, which provides that an
issuer such as Geneva cannot enter into a "Material Transaction" if a
"Related Party" such as FedPac is or is likely to become a direct or indirect
party to the Material Transaction, unless the Material Transaction has first
been approved by an ordinary resolution of the shareholders of Geneva. A
"Material Transaction" includes a transaction where an issuer borrows an
amount in excess of 10% of its average market capitalisation.  The maximum
amount of the FedPac loan is in excess of this amount.
4 Resolution 3 - Approval of loans from the directors
Further background to resolution 3
Two non-executive directors, Robin King and David Smale, have agreed to make
loans to Stellar Collections Limited on the following terms:

Amount: In aggregate $2,500,000

Term:  3 years

Interest rate: 10.00% per annum with interest paid monthly in arrears

Repayment: The lenders have the option to elect for these loans to amortise
at the rate of 5.0% of principal each quarter with the first principal
repayment being 3 months after drawdown or have their principal repaid in
full in one lump sum on maturity.

 Stellar Collections Limited has an overriding option to commence repayments
of 5.0% of principal per quarter 12 months after drawdown, and 18 months
after drawdown Stellar Collections Limited is able to make additional
principal repayments on giving the lenders 30 days' notice.

Security: Secured by an indemnity from CBL Insurance Limited, a first charge
over all of Stellar Collections Limited's assets, a second charge over the
shares held by Pacific Rise Limited in Anglesea Medical Properties Limited
(behind the first charge in favour of the lender of $1,500,000 to Pacific
Rise Limited referred to on page 3) and an unsecured guarantee from Geneva.

Purpose: To repay the Existing Funding Facilities

The directors consider that the interest rate, term and security for these
loans are favourable to Geneva and more favourable to Geneva than a loan for
$2,500,000 available on similar terms from an arms-length financial
institution.  As required by NZAX listing rule 9.2.5(b), directors David
O'Connell and Peter Francis have issued a certificate stating that in their
opinion the terms of the loans are fair and reasonable to Geneva's
shareholders and in the best interests of Geneva.  A copy of that certificate
accompanies this notice of meeting.

Requirement for Resolution 3
Resolution 3 is required by NZAX Listing Rule 9.2.1, which provides that an
issuer such as Geneva cannot enter into a "Material Transaction" if a
"Related Party" such as a director is or is likely to become a direct or
indirect party to the Material Transaction, unless the Material Transaction
has first been approved by an ordinary resolution of the shareholders of
Geneva.  A "Material Transaction" includes a transaction where an issuer
borrows an amount in excess of 10% of its average market capitalisation.  The
maximum amount of the directors' loans is in excess of this amount.
5 Consequences of voting for or against the Resolutions.
The 3 resolutions are not interdependent on each other.  However Geneva will
only be able to be released from moratorium if it has sufficient funding to
repay the Existing Funding Facilities. While Geneva may be able to find
replacement funding for the FedPac and directors' loans described in
resolutions 2 and 3, it is unlikely that Geneva could replace the Westpac
funding required under resolution 1.  Consequently if the shareholders do not
pass resolution 1, Geneva is unlikely to be able repay the Existing Funding
Facilities.  If the shareholders do not pass resolution 2 or 3, Geneva will
only be able repay the Existing Funding Facilities if it draws down on the
back-up facility and finds replacement funding.

If all the resolutions are passed and Geneva draws down all the New Funding
Facilities:

- Geneva will be released from moratorium which will result in a significant
reduction in its costs since being in moratorium requires Geneva to prepare
and deliver a number of periodic reports to its debenture trustee and its
debentureholders.  Additionally as Geneva will not have any debentures on
issue to the public, this will further reduce its compliance costs.

- Geneva will have committed funding for at least 2 years (and longer if
Westpac extends the term of the securitisation program) with minimal
principal repayments during that period, which will allow Geneva to
concentrate on expanding its business and increasing its profitability rather
than accumulating cash in order to make 6 monthly repayments to BOS and its
debentureholders as it is currently required to do.

If any of the 3 resolutions is not passed, and Geneva is unable to find
replacement funding, then Geneva will be unable to repay the Existing Funding
Facilities.  Geneva will remain in moratorium and will continue to repay its
debentureholders and BOS by 6 monthly instalments.  Geneva will be unable to
expand its business and unless new debt funding is raised to replace the
amounts repaid each 6 months, Geneva will need to reduce its lending levels
to generate sufficient money to make the 6 monthly payments.  If this were to
continue without new debt funding being raised, Geneva's business would no
longer be viable and would need to be closed down.

Dated 15 July 2013

By order of the Board

David O'Connell
MANAGING DIRECTOR

INVITATION:  At the conclusion of the meeting, afternoon tea will be served.
End CA:00238638 For:GFL    Type:MEETING    Time:2013-07-16 12:45:03