Elders' owners liquidate in parent's restructuring

By Deborah Hill Cone

Friday 29th November 2002

Creditors have until tomorrow to put in claims against the holding companies that own Elders Finance after owners Eric Watson and Mark Hotchin put them in voluntary liquidation.

The move, described as a cosmetic change, is part of a restructuring of Elders' parent company, Hanover, but the effect of the liquidation means from December 23 Mr Watson will have no personal liability for his finance company assets.

The change may also mitigate the requirement for Mr Watson to file financial statements now he is officially domiciled abroad although this is not the reason it has been done.

The liquidation has less effect on Mr Hotchin, who held his half stake in Elders through trusts rather than, as Mr Watson did, using a company owned by him personally.

District Holdings, owned by interests of Mr Hotchin, and Caspian Investments whose 100% shareholder is Mr Watson's Cullen Investments, were both placed in liquidation last month.

They are 50:50 shareholders in Hanover Financial Services, the parent company of Nationwide Finance and Elders Finance, which in turn owns subsidiary finance vehicles United Finance, FAI Finance and Australian Finance Holdings.

Hanover Financial Services is billed by its PR people as the biggest privately owned finance company in New Zealand.

Creditors have until tomorrow to make any claim against the two companies, which have a deadline to be liquidated by December 23.

Liquidator David Vance has filed reports on the two companies with the Companies Office that show although the two partners are equal shareholders Mr Watson's company is going to have a bigger surplus after the liquidation than Mr Hotchin's.

District Holdings has total assets of $12.7 million and $9.3 million owing to intercompany creditors and trade creditors, leaving a balance of $3.4 million, whereas Caspian Investments has $12.2 million in assets and $1.3 million owing to creditors, leaving a balance of $10.8 million.

Mr Hotchin said the decision to liquidate was necessary because the company was moving from one structure to another. The assets had been sold to the new company and accountants' and auditors' advice was that the entities that were left should be liquidated.

The new structure will see parent company Hanover Group with three subsidiaries: Hanover Financial Services, Hanover Investments and Hanover Management. The finance companies will sit under Hanover Financial Services.

Mr Hotchin said the reason for the restructuring was "to get everything into its appropriate box."

It had taken longer than expected because it had been a massive job getting all the companies audited and tax issues sorted out, Mr Hotchin said.

Under the new structure Hanover Group is owned by Hanover Group Holdings, which is in turn equally owned by Hotchin Investments and Forefront Investments. Companies Office records show both of those companies are wholly owned by Ernst & Young legal executive Lisa Tauber, but Mr Hotchin said that had been a temporary setup and now they were owned by trusts the Hotchin Trust and Peak Trust.

Mr Watson has relocated to live in London, meaning he would in future have to file financial statements for his privately owned companies, including Cullen Investments, something the publicity-aware tycoon would not enjoy.

Under the Financial Reporting Act companies more than 25% owned by a person "not ordinarily resident in New Zealand" must file financial statements with the Companies Office.

When Mr Watson announced in October he was moving to live in the UK, sources said there had been some friction between him and Mr Hotchin because Mr Watson wanted to extract cash out of Hanover to take with him "to play with."

Mr Hotchin said this was untrue: "No, he never wanted to take money out of this company. He's a great believer in maximising value so he's not a big believer in dividends and removal of money from companies.

"It has never been raised by him and because I am trying as hard as I can to grow the company I'm not looking to do that."

This week a separate source claimed Mr Watson was interested in buying a European bank, but Cullen Investments chief executive Phil Newland said this was not true "not to my knowledge."

Mr Hotchin said he had been in the UK earlier in the year and had looked at a company based there that had a small, "virtually unused" bank as one of its assets.

"I did talk to Eric about it and we did some due diligence on it and decided that it was too hard and didn't bother."

Elders Finance released its 2002 accounts in September showing the company made a record profit of $14.1 million excluding the $10.3 million abnormal item for selling Hanover investments to Hanover Group.

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