“Bridgecorp is a company with a commitment to excellence. If you are an investor or borrower, you will not be disappointed,” says managing director Rod Petricevic on Bridgecorp’s website. Hey, Rod, wanna bet?

Calling in the receivers for the New Zealand arm of the trans-Tasman property financier yesterday takes to four the number of high-yield debenture companies to fail here in 18 months, imperilling a total of $1.4 billion in investors’ funds.

Bridgecorp will be familiar to anyone who reads the Sunday papers with an eye to the high-yield debenture advertisements. It’s also an outfit that’s very familiar to ASIC which obtained stop orders on a Bridgecorp prospectus last year.

Basically, ASIC had good reasons to believe Bridgecorp was another disaster waiting to happen — but the Bridgecorp site still touts its “investment products”.

Worse for ASIC is that Bridgecorp’s troubles undermines a key part of the allegedly cunning plan new boss Tony D’Aloisio has for dealing with the growing scandal. D’Aloisio reckons the highest-risk category are the 83 unrated and unlisted debenture issuers — but Bridgecorp, like some of Westpoint’s debentures, has been rated.

Property Investment Research had given investment grade ratings to Westpoint products. Funnily enough, Property Investment Research yesterday withdrew its rating of Bridgecorp “secured” debentures.

The quality of rating services at this end of the market is not necessarily brilliant. It’s rather like the “investment” ratings paid for by many rural managed investment schemes. As John Collett reported about Westpoint:

Property Investment Research denies that payments influence its ratings and says its research is independent. Its head of research, John Welch, says in 2004 it gave “non-investment grade” ratings to two of Westpoint’s projects.

But in the same year, it gave an “investment grade” rating to the Westpoint Income Fund.

Welch says that despite some concerns about Westpoint, the researcher was comfortable the fund was run separately from the other parts of the Westpoint business and fully regulated.

The “investment grade” rating on the Income Fund was maintained in Property Investment Research’s update of the earlier report in August last year. But it notes in the 12-page report there were “significant delays” on two of Westpoint’s property development projects.

It notes that Westpoint is in “litigation” and there is a “lack of availability of audited financial statements”. The report also says Westpoint is in a “below average financial position”.

The investment maintained its three-out-of-five-stars “investment grade” rating.

A bloke might form an opinion about just how bad a product would have to be to score less than three stars from Property Investment Research.

Tony D’Aloisio wants the relevant federal parliamentary committee to believe the likes of Property Investment Research will clean up the grubby end of the finance business if only all these high-yield debenture issuers were rated. I think Tony is wrong.

And ASIC has so little faith in its assessment of what it says are the highest-risk 83 firms that it’s refused to even provide us with a list of them.

So after Westpoint, Fincorp, ACR and now Bridgecorp, who’s next?

Peter Fray

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