Documents obtained by the Sunday Star-Times reveal that VTL Group, whose subsidiary Nathans Finance collapsed into receivership in August, had serious debt problems in its American business as far back as 2005, but decided to hide them from investors.
Shareholders in vending machine franchisor VTL have lost millions since August as the share price plummeted from $1 to just 6c, and $167 million of Nathans Finance debenture money is at risk.
Much of that sum was lent to VTL. At the end of July VTL’s debt to Nathans was $110m.
But while considerable sums of investors’ cash was risked with VTL, the Star-Times has learned that its American business, All Seasons, was in breach of its banking covenants in August 2005, just months after VTL bought into the company. VTL’s management and its auditor Staples Rodway were aware of the breach and discussed disclosing it in the company’s accounts for the year to June 2005, but decided the issue was “insufficiently material”.
By January 2006 All Seasons’ debt problems were so severe that its American banker CapitalSource was threatening to pull the plug, an action that would have left All Seasons unable to pay staff.
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