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Aorangi statutory managers seek ruling on $60M of assets pledged by Hubbards

Wednesday 4th April 2012

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The statutory managers of Aorangi Securities have sought a court ruling on the status of $60 million of assets pledged to the failed firm by the late Allan Hubbard and his wife, which will have a major bearing on how much investors recover.

Receivers Richard Simpson, Trevor Thornton and Graeme McGlinn of Grant Thornton said the way the Hubbards introduced the assets to Aorangi was “unconventional and the transfer of legal title of assets to Aorangi was not completed in most cases.”

Getting a High Court ruling on whether Aorangi legally has title to the assets involves a decision on a “complex situation” and getting a hearing scheduled may not be achieved this calendar year, they said.

The managers have distributed $11.5 million, or 12 cents in the dollar, to investors to date. Any further payments now hang on the court ruling and other loan recoveries. That’s been at a cost of $4.15 million since the managers were appointed, including $2.4 million for their own fees.

The assets introduced by the Hubbards were some 34 separate entities such as interests in farm-owning partnerships, including shares and loans. The Hubbards introduced the assets in their personal capacities as trustees of various trusts and as company shareholders and directors, the report said.

At the time the assets were moved across they were valued at $96 million but were subsequently scaled back by Hubbard.

Some $4.9 million of Aorangi’s $25 million investment in Te Tua Charitable Trust, which was administered by the Hubbards, has been recovered and provisions have been made for $11.5 million that may not be recoverable, the managers said in their 10th statutory managers report.

Because many of the loans were ‘last resort’ loans, recovery “will take time and there are likely to be substantial losses on this part of Aorangi assets,” they said.

The report said the managers have been approached by a lawyer for someone claiming to be an Aorangi investor owed $5.6 million, which they claim was transferred without their authorisation to another entity associated with Hubbard in December 2009.

The managers made the general point that in the early days of Aorangi, up until 2004, loans to Aorangi were secured through direct relationships with borrowers, but such relationships had subsequently been eliminated by loans repayments and advances.

Total realisations to date are $36 million, of which $20 million is being held subject to determination of ownership of assets.

Investor balances in 2007 were about $135 million and the company had “a significant balance of cash on hand” that year.

“It appears that $140 million has been utilised to repay investors’ principal and $95 million of new investor funds have been deposited with Aorangi since 2007,” the managers said. “In our review of loans over the past five years, we have ascertained that very little interest was received on actual loans.”

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