ABOVE: Work continues on Mark Hotchin's Paritai Drive property. Photo / Greg Bowker
Hanover Finance and United Finance debenture holders are being asked to accept a Geneva Finance style debt for equity swap. Geneva Finance debenture holders swapped 15 per cent of their investments for shares in Geneva which theywere told were worth 36 cents. The current bid for them on the NZX is 1c and they haven't traded this week. They last traded at 9c.
This is the risk for Hanover Finance investors. They are swapping something worth up to 70 cents over the next five years (according to Hanover's board) for shares potentially worth 78 cents if Allied's shares rise (!) to 44 cents from their 33 cents now. And that's after an extra 900 million shares are added to the existing 37.7 million. Do debt investors really want to be become stock market investors on the promise a company's stock market value will increase 34 times?
I think it's time for Hanover's trustee to call in the receivers to have a proper look at that toxic loan book or for the government to appoint a statutory manager. If there was wrongdoing this the only way evidence will be found.
The danger is that Hanover investors are about to lose again as a potentially savvy vulture investor picks the juicy bits off the bones of the Hanover carcass in return for worthless shares. The government has a role both in considering the appointment of a statutory manager to Hanover and through the Treasury, which will have to approve any deal that Allied Farmers does because of the government guarantee for Allied Nationwide Finance.
I also think it's time for Mark Hotchin to sell his Paritai Drive mansion (with the 12 car garage) and donate the proceeds to Hanover investors who trusted him. That may restore his reputation. Otherwise, I doubt he could survive as a public figure in New Zealand after this. He promised at the moratorium meeting to stick around to ensure investors got their 100 per cent back. He also suggested he might sell his New Zealand properties to contribute to the recovery effort.
If he doesn't, he should be run out of town in the way any social pariah would be. Remember, he and Eric Watson extracted over NZ$80 million in dividends in the years leading up to Hanover's collapse.
Here was the exchange at the moratorium meeting about what Hotchin should do with Paritai Drive and his Waiheke properties.
Another questioner asks Hotchin about his Waiheke and Paritai Drive properties and whether he would sell them to help repay investors."They're your homes and your lifestyle. This is our money. If necessary, will you sell those properties to pay us back our money?" the questioner asks.Hotchin replies saying it's a difficult question. "The Waiheke property has been pledged in the package. The Paratai Drive property. I wish to hell I'd never bought it. It's half finished and couldn't be sold. Our intention is to finish that house and to live in it as our home," Hotchin says."If it's (the repayment plan) going to be close and we need to put up more, I guess we'll have to find it from somewhere, and that might have to go," he says of the Paritai Drive property. He is applauded.
