Rich-listers have paid up, says Hanover

Mark Hotchin. Photo / Brett Phibbs

Hanover Finance's independent directors say owners Mark Hotchin and Eric Watson have "absolutely and fully" contributed the extra cash they promised investors when seeking approval for a moratorium late last year.

But they say the rich-listers have not been approached about making an additional contribution to cover the repayment shortfall revealed this week.

On Tuesday, the company said Hanover Finance debenture investors would likely receive only 70c in the dollar of their principal back over five years, rather than full repayment.

Debenture investors in sister company United Finance would likely receive 90c.

Since then, questions have been raised over whether Mr Hotchin and Mr Watson have contributed all of the financial support they promised late last year.

According to Shareholders Association chairman Bruce Sheppard, the pair "had not paid a single dime" into Hanover's coffers.

But yesterday, Hanover's new independent director, Des Hammond, said: "The requirements of the DRP [delayed repayment plan] have been absolutely and fully complied with.

"Speculation like that does nobody any good," he added, referring to Mr Sheppard's comments to TVNZ's Close Up programme.

Hanover chairman David Henry, who replaced Greg Muir in that role this year, said: "I'm more than comfortable that they've adhered to what they said they'd assign in the way of property assets and money being held in escrow [trust] for use under the DRP.

"There's the net $40 million of property assets that were agreed under the DRP and the $10 million of the first tranche of the $30 million has been lodged with the solicitors and held in escrow that we haven't drawn on yet."

A further $20 million had been committed by way of a guarantee that could be drawn on in later years, said Mr Henry.

However, even as Mr Hotchin and Mr Watson pledged what they said was $40 million of property assets to the company, accountancy firm PricewaterhouseCoopers questioned whether that was a credible estimate of their net value.

That was almost a year ago and, as Hanover said this week, the property market had continued to deteriorate since then. Mr Henry would not say what he thought those assets might be worth now.

"We're still working on the audited accounts but the value of the property still exceeds any loans attached to them by some miles."

Asked whether that would be anywhere near $40 million, he declined to comment, except to say the company's audited accounts, which are due out any day now, should provide an accurate appraisal of its assets.

Mr Hotchin told the Herald in July last year that "the bottom line is there will be additional money put in to ensure the investors get their money", but Mr Henry said yesterday that he had not approached Mr Hotchin or Mr Watson about further cash to address the shortfall that was revealed this week.

"We've never had that conversation."

He said it was not something he believed he was legally able to do.

Mr Henry said this week's revised estimates of likely payouts to debenture investors might also be altered at a later date, either higher or lower.

"If the market goes down further, obviously that would be reflected; conversely, if the market went up, it would also be reflected."

Mr Hammond, who was head of restructuring services at accountancy firm KPMG until March this year, said he and Mr Henry were employed by the company under the terms of the DRP.

Their appointments were approved by the trustees of Hanover Finance and United Finance as independent directors.

"It's a job that needed to be done and independence is something that the company needed."

He was "absolutely" satisfied the companies were now being run in a manner consistent with the best possible outcome for investors.

Mr Hammond urged investors to read the company's annual report, which would be published shortly.

"That clearly specifies what's going on in the companies, both of them, and while it might be a difficult read because of the current reporting standards, it's well worth it."