Tuesday 9th December 2008
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One United Finance investor asks if Hanover will be responsible for Axis liabilities.
Mark Hotchin says assets of Axis will transfer to Hanover. Axis liabilities will stay with the Axis parent company which is not Hanover.
Hotchin says the Axis assets will be "worth a lot of money over time."
Fredricson says this gives Hanover control over when to get best prices for those assets.
An investor asks for the trustee's view on the DRP plan.
Bryan Connor from Guardian Trust ducks the question saying it is "probably inappropriate" for a trustee to make recommendation as all investors have their own reasons about which way they wish to vote.
The next person breaks the rules and makes a statement, saying Hotchin should put in his personal assets, including property at Waiheke Island and Paratai Drive.
He goes on to say that "if Mr Hotchin is not prepared to do that he should be prepared to be removed from the Rich List."
This gets a round of applause and interjections, which are further heightened by a comment that Hotchin should also be removed from "Parasite Drive."
The meeting continues with questions about the level of scrutiny placed on Hanover.
Outgoing chairman offers the best line of the meeting so far: "We've had our kilt looked up more often than any Highland dancer could have dreamt of."
Muir provides a strong description of what happened.
He says Hanover had always run a matched book which meant that money coming in was enough to meet repayments.
He says that from late last year right up to June he can "put his hand on his heart with absolute honesty" and say the directors believed they can repay all investors.
Two "extraordinary things" happened. The property market collapsed and then three big finance companies (Dominion, Dorchester and St Laurence) announced they were in trouble.
At this stage reinvest rates and new money flows which were OK stopped.
He said in June, Hanover had a $40 million cash buffer.
Next question elicits an open response from PWC director John Waller on his take on the plan and whether there was any legal action which could be taken against directors, notably over dividend payments made to Hotchin and fellow shareholder Eric Watson.
To summarise Waller's comments he said that there are lots of allegations, but not much in the way of factual claims in the market.
He says action would be costly and time-consuming and he suspected any claims would be "strenuously defended".
In response to another question he reiterated this view and said if the DRP goes through, receivership could happen later if the company missed two consecutive repayments.
If that happened Hanover would still have $36 million from shareholders and the Axis assets.
Waller reiterated that the restructuring plan was better than receivership and that there was a mis-held belief that a receivership would return money to investors.
Waller said that was not true as it depended on what happened to the property market and repayment of loans.
Waller used the phrase that "a bird in the hand was better than a bird in the bush" and the DRP was a bird in the hand.
Waller said if it was retribution investors wanted then they vote for receivership. However it came with the caveat that the outcome of legal action was uncertain, costly and time consuming.
The next question asked Hotchin, was why didn't he put personal properties into the plan? His round-about answer was that originally shareholders suggested the contribution would be around $40 million, but PWC got that up to $96 million.
This, he suggested, was enough to get investors 100c back in each dollar invested.
He also pointed that what shareholders had pledged was "a lot of money."
Hotchin was asked again why he hasn't included his Waiheke and Paratai Drive properties.
"Why don't you sell those properties to pay us back our money?" an investor asked.
Hotchin: "That's a difficult question."
However he said that the Waiheke property has been pledged to the package.
Paratai Drive is half finished and unsaleable. ("I wish I had never started it"). He wants to keep it to be his family home.
Hotchin says real estate and cash assets have been pledged.
If the plan gets close but needs more money Hotchin says "we will find the money."
Litigation has come up again.
Fredricson says mezzanine funding is a business which involves itself in litigation.
Primarily because of disputes about when and how much loans should be paid back.
Trustee Brian Connor says he has been kept appraised of litigation in the United States.
Fredricson says this person is "not an investor. He's a borrower and he's not paying us back."
Another question was from a man who had invested with the company for 14 years and invested another $100,000 days before the repayment freeze after having discussions with Hanover's finance people.
Fredricson responded saying one of the company's general managers reinvested a bigger sum with the company on June 30. His money is frozen like other investors.
A lady asks a question about whether Hanover will be able to raise money from retail investors again.
She says so many have been burnt they would never go back to Hanover and finance companies again.
Muir says he doesn't expect debenture investors will be an available funding line again.
He also notes that people have lost a lot of faith in finance companies and debentures.
However he says that view may change when investors are repaid.
Another investor asked a similar question and said he won't be taking his grandchildren to Disneyland.
He asked whether Hanover would diversify into other areas. Muir said Hanover is a property lending business and that is where its skills are. A related company, FAI, which isn't in moratorium is a consumer finance business.
Now it's statement time.
An investor who was anti the DRP last week, but has changed his view and outlines reasons why.
Another makes plenty of comments including that to win a lottery, you need a ticket.
"I would like to take a ticket in the Hanover Finance debt recovery." In fact he was taking 86,000 tickets.
Shepherd says investors have to weigh up the $96 million against what they are giving away. In this list was lost interest and the possibility of litigation.
He thought the DRP was a pig and that litigation was a poke in the dark.
It was up to investors whether they wanted a pig or a poke.
"You decide what pig you want to poke."
The final statement was similarly anti and suggested it was receivership now or in five years' time.
With that the chairman started voting and then adjourned the meeting.
He says it will talk 30-45 minutes for votes to be tallied.
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