Hanover confirms investors who voted for moratorium will get back 70%

Tuesday 17th November 2009

Hanover Finance, which convinced its investors to agree to a moratorium on repayments last year, has confirmed they’ll now get 70% of their money back at best.

Write-downs in property values and requirements under International Financial Reporting Standards resulted in a $102 million loss for the year ended June 30, according to a report from directors.

The troubled finance company has made no new lending since December, instead concentrating on generating sufficient cash flow from its loan receivables to meet principal repayments under its debt restructure proposal (DRP). However, the deteriorating commercial property market has cast doubt on its ability to meet those payments.

“The level of bad debts, write downs and doubtful debt provisioning required is extremely disappointing,” directors Mark Hotchin, Des Hammond and chairman David Henry said in the report. “But, given the uncertain and difficult economic outlook for a large proportion of Hanover’s borrowers and investments, the increased level of impairment expense is required to reflect the current market circumstances.”

Hanover’s investors voted last December to allow it to operate under a five- year moratorium plan, under which secured depositors were promised full repayment of deposits through a DRP, though not the interest owed. About 16,400 investors are owed around $550 million. Major shareholders Hotchin and Eric Watson have $60 million tied up in the company.

So far, investors have received 6 cents in the dollar, which will make up part of the 70% repayment.

Paraparaumu-based stockbroker Michael Warrington said investors in Hanover are sick of the criticism and blame in the company.

“The majority of investors simply want to know the facts, asset values and probabilities of receiving their money back,” Warrington said. “Hanover does have some good assets, but they’re incredibly difficult to exit right now.”

Hanover has two large property investments in Queenstown in the Kawarau Fall hotels development and the Five Mile development site. Kawarau Falls already had town planning approval, and Five Mile recently received the same. The directors said that “realising good values on these two large exposures is very important in achieving estimated recoveries for secured depositors.”

“The directors are attempting to reach an appropriate balance between collecting sufficient funds to meet the repayment schedule under the DRP and adding value to these loans and other assets that are expected to yield better value if held for a period of time.”

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Businesswire.co.nz

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