Losses in Hubbard investment vehicles at least $58 mill, statutory manager says

Friday 29th October 2010

Investors in Allan Hubbard’s frozen vehicles will probably lose at least $58 million, according to the latest report from the government-appointed statutory manager.

Richard Simpson, Trevor Thornton, and Graeme McGlinn of Grant Thornton say investors in Aorangi Securities face a write-down of $28 million from tenuous investments in related entities Te Tua Charitable Trust and Southbury Group, while Hubbard Management Funds faces a shortfall of $30 million.

Some 400 investors in Aorangi Securities owed about $96 million will get an initial payment of 3 cents in the dollar, or $2.9 million, this month, and the statutory managers hope to claw back some $20 million by the middle of next year. Other assets will take longer to realise. While Aorangi’s total assets amount to $130 million, its exposure to Te Tua Trust and Southbury raises “serious concerns” about their recoverability, they said.

The managers were critical of a series of transactions in March this year when Hubbard transferred some of his equity interests into charitable trusts. The transactions are of “doubtful validity” and an annulment process is under way.

Hubbard’s interests were frozen by Commerce Minister Simon Power in June after an anonymous complaint that an investor put money in Aorangi Securities without being shown a prospectus. Since then, the Serious Fraud Office has begun a separate investigation into the funds.

The managers said they had “serious concerns” with the way Hubbard reported HMF’s performance and the uncertainty as to whether the fund was collectively invested or made up of individual investor portfolios.

HMF investors were owed $82 million as at March 31 and will probably recover about 60% of their principal, the managers said. In their previous report they were picking a 75% return.

The statutory managers, their lawyers and advisers, have run up fees of $603,471 for their work on HMF, and $769,189 on Aorangi Securities.

The next report is due at the end of next month.

Businesswire.co.nz

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