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Mark Hotchin - Source: AMP Business -
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The demise of Hanover finance and the apparent evaporation of hundreds of millions of investors' dollars is a long and complicated saga. And it seems only to become more complicated as time marches on.
If you're a little lost, let me bring you up to speed as briefly as I can. Hanover froze repayments to investors in mid-2008 and at the end of the year those investors voted for a moratorium and debt repayment plan that promised to return them their money over five years.
Less than a year later and with just six cents in the dollar returned, it became clear the plan would fail. They were again presented with two options: receivership, or to swap their debenture holdings in Hanover for shares in Allied Farmers. In December 2009 they voted, narrowly, to go with the latter.
Since then, Allied has revised the supposed $396.4 million loan book value down to less than $100 million. Its finance company, Allied Nationwide Finance, was tipped into receivership last year and it has launched, and then abandoned, plans to raise fresh capital.
Its chairman resigned, its managing director - who spearheaded the deal - resigned, and its share price plummeted from some 20 cents before the deal, to just 2 cents today.
Allied has brought a number of transactions to the attention of authorities and both the Securities Commission and the Serious Fraud Office are investigating. Allied is also embroiled in court action with Hanover over a $5 million payment that was due to be paid to Hanover, but which Allied is now refusing to stump up.
Which is where, I guess, the tit-for-tat, the war of words, the battle for the sympathy of investors, begins.
I've got to say when I saw this website and letter to Allied's shareholders last week from Mark Hotchin and Hanover chairman David Henry, I almost choked on my cereal.
Having been to the moratorium meetings in 2008 and to the roadshow meetings for the Allied Farmers deal in 2009 and spoken to the aggrieved investors over the past few years, it seemed a bit rich for the two of them to be painting themselves as white knights, here to stand up for investors against big bad Allied Farmers.
You might well ask, aren't investors in this situation because of Hanover Finance in the first place? Was Mark Hotchin not one of the shareholders (let's not forget Eric Watson here) who took $86.5 million in dividends from Hanover in the two years before it collapsed, some $15 million of that in the six months before deposits were frozen?
Did the repayment plan Hanover promoted to investors as a way to recover their money not fail within a year? Did Hanover not then endorse the sale of the assets to Allied Farmers, saying it was a better option for their investors?
Well, yes.
But Mark Hotchin argues that he, like his 16,000-odd former investors, was sold a dream and it's turned into a nightmare. His criticism of the Allied deal is, at heart, that investors "got sold a concept that was never put into place", he told me on AMP Business this morning.
To be fair, since Allied took over the assets in December 2009, stock exchange notices on loan writeoffs, devaluations and the receivership of their finance arm have come thick and fast and have made dismal reading.
So was Allied lead astray by Hanover and sold a giant lemon? Or, as Hotchin is now arguing, has Allied broken its promises, mismanaged the assets and sold them off too quickly and for far too little?
At this point, it's a Mark Hotchin-said, Rob Alloway-said situation, both accuse the other of trying to shift the blame. I don't want to go through every aspect of the tit-for-tat, but I don't think either of them come up smelling of roses.
But I've got to say I'm not sure I buy Hotchin's professions that the reason he's decided to go on the offensive and on live television is for altruistic reasons, because someone needs to do something so shareholders eventually get some money back.
It's not just the evidence of Hotchin's business practices before the demise of Hanover - in the form of large dividends just months before repayments to investors were frozen - that makes me so sceptical. Hotchin explains this away anyway, saying they put twice what they took out back into the company by reducing related-party loans.
Something much more basic worries me. This morning I wanted to know whether he thought he had a business future in this country and his answers frustrated me.
He said he didn't know, but eventually conceded he would pursue business opportunities, but probably not in the finance company sector.
But what about FAI Money, the finance company owned by - you guess it, Mark Hotchin and Eric Watson. Granted FAI no longer takes deposits from the public and it's a consumer finance business. But why not say that in the first instance?
Mark Hotchin fronted up this week. But to me that is not the same thing as being upfront.
Comment on Nadine Chalmers-Ross' commentary below.
Read more Nadine Chalmers-Ross commentary here .
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Post new commentRose Hill said on 2011-02-18 @ 18:20 NZDT: Report abusive post
I do feel sorry for the smaller Hanover investors who have lost money (my Mum is one) but they invested for higher returns and therefore a higher risk. What part of the word RISK do they not understand?