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Investors in frozen Hubbard funds to get 3 cent return this month

Friday 1st October 2010

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Investors in Aorangi Securities, one of Allan Hubbard’s frozen investment vehicles, will get a 3 cent payment in the dollar this month as the statutory managers prepare to sell some of its low-hanging assets.

Some 400 Aorangi investors owed $96 million will get their payment this month, and a further 20 cents by the middle of next year if statutory managers Richard Simpson, Trevor Thornton and Graeme McGlinn of Grant Thornton are successful in securing market value for assets that could be sold in the short to medium term, according to their third report into Hubbard’s business affairs.

The assets were flagged for sale by Hubbard, and Simpson said they won’t hold a “fire sale” to claw back funds. Hubbard said he’s willing to subordinate his Aorangi investment.

Aorangi, which was found to have an alarming gap between its loan income and repayments to investors, faces $25 million of losses from its exposure to South Canterbury Finance Ltd. shareholder Southbury Group, and Te Tua Charitable Trust. The underlying value of the investor’s assets had declined since February.

South Canterbury Finance’s woes sparked the original complaint that led to the statutory management, with a heavily censored version released by the Securities Commission to the Hubbard Support Team last week. The anonymous complaint raised concerns as to why Aorangi was allowed to operate without providing an investment statement or prospectus.

The managers’ report showed the value of the Hubbard Management Fund grew $6.6 million to $49.1 million with gains in stock prices and the Australian dollar since June 20.

The fund, which was a later addition to the statutory management, will probably lose $18.5 million in related party losses, mainly from its exposure to Southbury and the collapse. It won’t be able to make repayments until it receives direction from the court over the fund’s nature and how it should be distributed.

The managers said the return will be at least a quarter below the value in the statements prepared by Hubbard. The fund was constructed on a “high risk-high return philosophy” and was at risk of making a loss while they prepare to sell its assets.

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