Allan Hubbard's sudden death has jeopardised a proposal by Auckland businessman Tur Borren to negotiate a commercial settlement to the Hubbard statutory management.
The Borren plan would have resulted in formation of a new company to hold the assets and liabilities of Aorangi Securities and Hubbard Management Funds, boosted by a $30 million "capital" injection expected to come from tipping some of the Hubbards' private assets into the mix.
The commercial solution has already been presented to statutory managers Grant Thornton. Borren believes it would have won support from all creditors, investors and co-venturers involved in the Hubbards' private affairs.
But the Timaru financier's untimely death means negotiations are not likely to proceed unless Hubbard's estate also approves the plan.
Borren had been advising Allan and Jean Hubbard since they were put into statutory management with Aorangi Securities in June last year. But he's not prepared to comment publicly until after Hubbard's funeral is held.
The respected businessman is managing director of private investment company Demi Holdings and has been actively involved in financial reconstructions - particularly the resolution of financial difficulties experienced by Renouf Corporation which was later relisted as Hellaby Holdings. Borren subsequently served as its managing director.
In an August 1 report, Borren said Allan Hubbard had given an undertaking he would support a commercially negotiated solution by giving him personal power of attorney to oversee its implementation until all public debts had been discharged.
In interviews with me, Hubbard had expressed confidence in Borren.
The plan has also been supported by South Cantabrian identities like John Acland, Neil Anderson and Diana Pye. Acland had been proposed as chairman of the new company.
Borren's report argues that the appointment of statutory managers in the private affairs of Allan and Jean Hubbard and associated entities was never requested by the investors who the statutory management was designed to protect. He says they've been disadvantaged by the outcome and suggests the Government may be accountable for this loss of value.
At the weekend, several of those investors told the Business Herald they've had a "gutsful" of waiting for the two Hubbard companies to come out of statutory management They're incensed at the very low distributions Grant Thornton has made and erosion of "their capital" through "inept management" and hefty fees paid to the statutory managers and lawyers.
The Hubbard Support group is now looking to take a class action against the Government, alleging that it put Aorangi Securities and Hubbard Management Funds into statutory management on the basis of a flawed Companies Office investigation.
Group spokeswoman Jan McPherson said the investors "have been the forgotten party".
The support group is expected to base its action on an investigation by Kerry Grass which it commissioned last December. Grass' investigation summary was sent to key Cabinet ministers - including Prime Minister John Key - last week. Key passed the issue to Justice Minister Simon Power, who had recommended the statutory management to the Cabinet.
Grass alleges the relevant authorities failed to carry out their duties objectively or reasonably after receiving a complaint from an investor who was granted anonymity. The report claims the Securities Commission hindered and prevented Aorangi Securities from issuing a prospectus, and that the Companies Office investigation was materially flawed in that, among other things, the inspectors didn't review all available evidence. It also says Grant Thornton had a conflict of interest and the Serious Fraud Office intimidated some elderly investors.
But Prime Minister John Key said yesterday the Government asked for and received advice about whether South Canterbury Finance and the Hubbards in particular should be put into statutory management. "We acted on that advice and we believe we did the right thing."