Hotchin: Put your anger aside

Hanover's Mark Hotchin, left, and Allied Farmers chairman John Loughlin field the tough questions. Photo / Mark Mitchell

Mark Hotchin yesterday implored investors in his Hanover and United Finance businesses to set aside their anger and decide on Allied Farmers' proposed debt for equity swap on the deal's merits.

At an investor briefing on the proposed $400 million transaction in Wellington yesterday, Hotchin, Hanover's directors, and Allied Farmers directors fronted up to several hundred predominantly elderly investors.

One woman told Hotchin and his colleagues how Hanover had declined her request for early redemption of their investment early last year after her husband had been diagnosed with blood cancer.

"We wrote a letter to Hanover directors begging and I have never begged in my life, begging to get our funds back to be able to get my husband to America to get a stem cell transplant, the only option, and you denied my request for that," she said.

"How callous! You deserve to rot!"

Hotchin later told the meeting his partner Eric Watson was initially unwilling to support Hanover's debt restructuring plan a year ago.

"The job I had to do was to convince him this would buy the company enough time that the assets would get better and to afford us other opportunities. Thankfully we did. At least we've got the company to a point where we can look at other options.

"You did make the right decision in December last year to vote for a debt restructuring plan. A receivership would have been disastrous. I don't think that's changed. These assets will not respond well in a receivership."

Hanover's initial presentation was handled by chairman David Henry and independent director Des Hammond, while Hotchin remained quiet.

Hammond fielded a number of questions which were directed at Hotchin, who eventually took the podium to respond to an investor's observation the proposal would largely absolve him and Watson of their obligations. "I'm not sure we should let you off the hook. We here are the masters and you are the servants, and the reference is not going to be good from any of us," she said.

"I understand that, it's hard to miss it and it's with justification," responded Hotchin.

"The risk here is that emotion drives a decision we don't think is in your best interests. Notwithstanding I don't particularly want to be here, I do think I need to try to show you the merits if I can."

Hotchin said under the current moratorium Hanover could do little but seek to collect on its loans. It could not try to add value.

Should the assets be transferred to Allied Farmers, "the whole structure changes".

"That debt becomes capital and affords them the opportunity to add value in deals. It affords them the opportunity to negotiate with the banks who frankly don't want to deal with us.

"Don't vote on this to beat me up, you should do it because it's going to be better for you."

Another investor demanded to know why Guardian and Perpetual Trust, who are the investors' frontline watchdogs, had chosen not to attend the meeting. He also asked why the trustees had allowed Hanover to finance such large, concentrated and in many cases poorly secured exposures including Queenstown properties such as Five Mile, and why they hadn't warned investors of the associated risks.

"Many of the secured depositors here, if they'd known what you were getting into, would have run a mile and this company would have collapsed far earlier."

Chairman Henry told investors Guardian and Perpetual did not attend because "this is our meeting not theirs". On the composition of Hanover's loan book, Henry said: "It's a reflection of what was allowed, sir, I'm sorry about that."

One of the final contributions from the floor came from an investor who acknowledged his anger but said he would vote in favour of the Allied proposal as "the best deal we have", drawing a modest round of applause.

"I think the message is getting through and by and large I think it's getting supported," Hotchin told reporters afterward.