A few things are clear to me.
a) The debenture holders will vote for the Hanover rescue.
b) They will not see anything like the promised amounts returned as suggested by the rescue documents.
c) Having had some sympathy for the holders the first time around (though not that much as the writing was clearly on the wall), I will have NO sympathy for them the second time around.

If you are one of those with your money frozen at Hanover all you need to do is read this http://www.stuff.co.nz//blogs/stirringthepot/2008/11/27/hanover-dorchest...

The property projects they are tied up in at Matarangi, Queenstown/Jacks Point etc are duds and will never turn around in the timeframe indicated.

Surely investors should know by now to do their homework.

The Hanover Group has been raked over the coals for years by journalists. Yet people were still happy to invest.

I don't see how they can complain.

Parties like this are planned a long way in advance.

The lesson is clear. It's your money, your savings, your future. Put some effort into learning about and understanding where you're putting it.

How they spent their private money is their business (Thanks to generous dividends)

The fools who deposited their money into Hanover (or any other finance companies)
will become greater fools if they vote for the package.

So who say the "greater fool" theory is not working ??

For me this comment goes to the heart of the matter.

"They should trust receiver John Waller and PwC to be more careful with their money than Mark Hotchin. I know I would".

So would I - by a country mile!

Sheppard was WAY out of line on this one (I think he'll deeply regret that quote).

"Many have had sleepless nights or worse over the loss of a lifetime of savings. This latest display of opulence is an insult."

Disagree Bernard, if Hotchin can afford such a private event and it's not from illgotten gains, but rather many years of hard work, all the more to him. Investors must accept 100% responsibility for their investments (after all they're more than happy to lap up the good times).

Sadly it'd be surprising if Fiancial Planners didn't advise debenture holders to vote for the plan.
This plan appears to be an easy out for the conscience (and possibly pockets) of paid 'professionals' who were simply trusted too much.

A clean receivership gets the fox out of the henhouse. Is it not better to take a loss now and start afresh rather then suffer years of further agony with the probability of yet again seeing your dreams dismembered....

When money was made of a piece of paper or metal it had some real value.
Now - money is no more then using the top row of the keyboard or a card - simple and easy for everyone.

in monopoly they have a get out of jail card,if I had 200million then I would think 10 million was cheap.

Duke , i think you are right. I think the owners have basically shuffled the money into their own accounts, using deficiencies in NZ law and loopholes in accounting practices. It is not as if they have actually done 'hard work' to earn that money, by producing a product or service. Or exported a product to bring income into NZ. All they basically do is shuffle money around.

Unfortionately they are sales men, and they did a good sales job, I will give them that. And I do think that investors will vote for it. However under receivership PWC have stated that investors will be worse off, than if it continued.

I have always disagreed with Bernard Hickey over his stance of " Greedy Investors" However I am absolutely astounded that investors would trust Hanover over the restructure for the 'promise'.

I promise to keep all my written opinions for 5 years.

The Roadshows remind me of the days when my father was a farmer and our pet sheep who was enticed with a piece of bread led the flock. She even led the killers into the yard and they trustingly followed her.

Suzzane, this website used to covered in Hanover banners and flash advertsing, and that is all Hanover really was, a marketing machine. They were good at marketing too. I remember some financial commentators saying only last year that Hanover was one of the good finance companies.

I don't agree that investors in these types of finance companies have been greedy, misinformed and naive maybe, but certainly not greedy. The fact is that there should be systems in place to protect investors, and prevent any dodgy practices taking place. Also financial prospectus's should be easy to understand, and things clearly disclosed, rather than being hidden behind complex wording and pages of legal speak.

The fact is, if the government hadn't guaranteed bank deposits a few months ago, we possibly would have had some NZ banks fail. Are people who save their money in the bank greedy, no. I believe if the owners of Hanover hadn't been so greedy and drawn money out of the company , basically crippling it, Hanover would be guaranteed today, and all investors would get their money back as it matured.

I agree with you Rob - I dont believe Investors were greedy but I fail to understand how they can trust Hanover NOW after so much deception from them and the industry.

Of course advisors who put people in Hanover will promote the Moratorium - it lets them off the hook.

The Government should put Hanover into Statutory Management in the interest of Investors and other parties who will suffer from Hanovers ongoing Management.

"The Government should put Hanover into Statutory Management in the interest of Investors and other parties who will suffer from Hanovers ongoing Management."

oh how easily you spend MY money now. Bugger off. thats what receivers are for.

Lots of sad stories i am sure.

And a good mention of the Sec Com. Like Sec Coms all over the world they have been useless. The people on them are just appointees concerned with keeping the game going not acting as sheriffs of the financial system. Just like the US Sec Com in 2004 which allowed the big 5 inv banks to self regulate. Yeah right!

Back in March 2004 Deborah Hill Cone did this piece for the NBR. It made me realise what cowboys the finance companies were and I advised anyone I knew to steer well clear.

It's worth a read just to see how even then it was clear these were places responsible investors wanted to stay away from.

http://www.sharechat.co.nz/features/nbr/article.php/85411e2a

raf good story, and I recall reading that before. This statement is interesting and telling.

Last year Hanover's shareholders took $17.7 million in dividends $14.7 million in cash and three million of in shares from Elders alone.
That seemed curious, given that in November 2001 Mr Hotchin had told me: "Eric [Watson] never wants to take money out of this company. He's not a big believer in dividends and/or the removal of money from companies."
Mr Hotchin said dividends were paid from after-tax profits and were "used within the group as required." Presumably the next set of accounts will show how much of the $14.7 million cash was ploughed back into the business and how much went into Mr Hotchin's and Mr Watson's pockets.

Good blog. My wife and I have 50k invested in Hanover Capital unsecured bonds (more fool us). The plan says we might get half of this back in 2013 if all goes well, and the debenture holders have been paid back 100%, which looks highly unlikely. Therefore, in all probability, we have lost the lot. In the meantime, no interest while Hanover holds on to our money for the next 5 years. What kind of deal is that? When we invested in Hanover it was on the understanding that they would pay us the agreed amount of interest and would repay our capital in full at the end of the investment term. That was the contract and if they are unable to fulfill their half of the bargain they should not be permitted to continue operating as a 'going concern'. We would be prepared to consider extending the term if it would enable Hanover to 'work through' a difficult period but we are not prepared to sign up to a proposal which gives Hanover 5 years of interest owing to us and half of our capital even if it costs us the lot. Simple as that.

EUFA have written to Simon Power, Minister of Commerce, this week re Statutory Management. Investors will naively vote for the moratorium because the generation of voters (investors) are trusting. That is why they got in this mess in the first place. As we know Hanover was the spin of all times "“ no money was spared on PR and targeting the market.

The proposition inveestors are to vote on is moratorium or receivership. I believe it a too big for the ill informed to make the decision and the choice is a bad1 and a bad2. Furthermore the Hanover propaganda that all investors have received in recent days is naturally going to appeal to the investors.

Simon Power needs to front up, be strong and send a clear message to the industry on this one. This is his golden oportunity as Labour sat on their hands on the Finance Crisis. This is not about party politics but about governece and protecting our society. We need the correct policing over this ie the Securtiys Commmission to do their job.

Then the investors need to group together and begin legal actions against Hanovers misrepresentation. Even if only 200 people are against the moratorium that is enough people to take action. Tony (blogger above) apparently asked the hard questions and was given false information. I understand an action on that matter (misrepresentation) can be taken on its own merit against the individuals concerned.

Investors are terrified of the court process, but if a good law firm grabbed this and took charge, people would trickle in like they have over the Vestar group. (45 initially committed to that and now we have over almost 300) Group cost become very affordable and work very well for the victims.

I cant beleive this article

http://www.stuff.co.nz/stuff/eveningstandard/4778964a6410.html

Hanover rejects the option of Statutory Management. That is a decision for the Securities commission NOT HANOVER.

Hanover get over yourselves!

David

I'd have to disagree on the "taxpayer shouldn't pay" arguement, its clear that there has been a failure of governance and that should be put right, if we were to continually apply this standard nothing would be done which is what we are complaining about.

Neven

Ummm..who funds the Com Com? When I am talking "failure of governance", I'm talking central regulatory governance, not the self serving 'directors' of Hanover. All the investors are taxpayers aren't they or do they not qualify for the protection of the state because they were 'greedy', even the fat get healthcare even though they are gluttonous.

Neven

Re Trevorbee's comment

"The plan says we might get half of this back in 2013 if all goes well, and the debenture holders have been paid back 100%,"... "In the meantime, no interest while Hanover holds on to our money for the next 5 years. What kind of deal is that? "

-------

Investors need to consider the following to gauge what they will actually recover in 5 years.

The immediate losses result from inflation ($1 today is worth less in 5 years) and opportunity cost. Assuming inflation averages 3% for 5 years, the loss over 5 years is around 16% or 16 cents on the dollar.

If an interest rate of 7.5% is introduced (opportunity cost) the compounded loss on every dollar is around 44% or 44 cents over 5 years.

Therefore, if Hanover was to hand-over today what it plans too in 5 years, every investor banking on a 100% return on principle will in fact realise closer to 40 cents on the dollar.

Those promised 50% of their original investment have lost 50 cents on the dollar before the get-go. So the fact of the matter is when inflation and opportunity cost are applied to their original investment they don't get anything in return. Instead they are relinquishing another 10 cents on the dollar over and above what they've already invested.

A very simple analogy which may not apply to everyone, but is intended to be food for thought before voting for the restructure. Which will do nothing more than let the directors away with atrocious conduct.

Bernard

Did you get an answer from John Waller as to why PWC as independents didn't evaluate the potential recovery a liquidator would make?

It strikes me that there is a lot of emotive comment around which is fair enough but ,many investors will want to vote for what the independent says will get the best return.

If PWC said that there is no basis for a claim against the directors/shareholders we could at least rule that out - if they have simply forgotten to evaluate it, its not to late to put that right, they could do their work and give an update to be sent to all investors by Hanover (at behest of Trustee wanting a clear playing field) - in fact surely the Trustee should insist on it.

The same goes for the valuation of the elements of the $96m - Hotchin and co are going round saying its 96m - it would only take a day or so for a desktop valuation by an independent to confirm or deny this given the correct access.

Go on Bernard - use your press muscle to get the Trustee/PWC to front up for the benefit of investors as the rest of us just get lost in the crowd.

Neven
A Statutory Manager ,which you were calling for, doesnt change the Law relating to governence.
They manage the company.
Having sold Projects in the US and having had to comply with the disclosure regime of the Securities and Exchange Commission I absolutley agree we need to see such standards here. I hope Simon Power looks into it and sends people over there to do so (pick me, pick me). Heck, even ASIC/APRA is ahead of NZ.
If you think the Directors have broken any laws then as I said earlier, file a complaint. I just do not see how a Statutory Manager will increase the final payout to investors. They will do nothing more than what a receiver will do.
Also your analogy is specious.

Neven
Well my post was in reply to Suzannes call, and you responded. But I do agree with you that the framework for disclosure and liability should be tightened. Having interviewed over 120 Blue Chip investors it does irk that the so called Blue Chip"advisors" will get away with their bad advice. It seems that ignorance can indeed be an excuse.
To me every finance company has been reckless in their trading simply because the cash flow in was not balanced with the cash flow out. Even the "cash flow in" wasnt in at all as interest was more often capitalised. They relied on reinvestment to balance their book and when the music stopped....
As for the investors, well they should have realised Fixed Return investments is all about preserving the capital first and the return is second. Greedy? maybe.

David C4S

Ha yes Charles Ponzi had a fine old time for awhile there. Certainly a lavish lifestyle fit for a king. Wait, that sounds familiar.
Some may view reckless as brave but the Companies Office doesnt... Perhaps there are 996 reasons to investigate

http://www.companies.govt.nz/cms/your-legal-responsibilities/obligations...

Me again. Do you get that sinking feeling that all is lost. We are in 4 failed finance companies (including Hanover) which have called for moratoriums and it really is very difficult to know which way to vote.

Most financial commentators seem to be saying that signing up for moratoriums is just going to extend the pain and will gain us nothing extra in the long run. On the other hand, PWC are giving a very guarded recommendation to vote yes on the basis that there is more chance of getting your money back over time than via a receivership. So, if the experts are divided, what are we to do? For us a "˜no' vote to Hanover is a no-brainer as we are unsecured Bond holders and are very unlikely to receive anything back whichever way it goes. However, we have secured Debentures in the other 3 companies.

Our first ventures into the world of finance companies was through a financial advisor who, I believe, was acting in good faith in the climate of the times. Later on, I was lured into investing in Hanover via their TV ads and glossy brochures. It was very comforting to read through their quarterly "˜Plenty' magazine which indeed gave you the feeling that you were living in a bountiful world of good food, wine and exotic locations to travel to, afforded by the plentiful returns provided by Hanover. Nothing wrong with this provided that they were being truthful when they claimed ""¦.Hanover, the New Zealand business with the size and the strength to withstand any conditions." Clearly they were not.

Of course, Hanover was caught out by the plummeting loss of confidence by investors following the collapse of a number of finance companies, compounded by the downturn in the property market. Hanover turned out to be no stronger than the rest. However, from all accounts, the owners have done very well out of it. As for the investors, only time will tell. My guess is that investors will vote "˜yes', they will get some money back, and eventually there will be another freeze with pleas for more time. Perhaps the only way to protect investors is for the government to extend the "˜guarantee' to the finance companies in moratorium. This could give them a real chance of surviving through the current global economic crisis and coming out the other side with their investor's money intact. It is all a matter of time.

I have read this blog with keen interest. My concerns are that there is too much conflict of interest. I understand John Waller was a trustee to an ERIC WATSON Trust in 2002. This has to be a serious conflict of interest. The legal profession are constantly faced with this type of situation prevent them to be instructed to act. For the life of me I cant work out the difference between this and PWC. The Guardian Trust (Trustee) appears to have the same conflict of interest re the Kinlock situation. This needs intervention and I can not see why the Securties Commission are siting on their hands over this.

Does anyone know the outcome of the Commerce Commissions findings on Hanover or is the investigations still going on?

Bernard replies
PwC and John Waller are not fans of Eric Watson. I think you'll find that relationship ended with some grumpiness.

Suzanne,
As far as I am aware the NZ Government does not grant Stat Mgrs the right to create new legislation. Which is what is really needed in NZ.
So in this context please explain why you think a Stat Mgr will do more than a Receiver.

Its simple. Theres assets and debt. The assets have to be sold to clear the debt.

BTW National was not in power so what realistically could they do? You seem to have some funny ideas about how government works

David,

I am not an expert but have had many discusiions and read about Statutory Management (ST M) and was given a good briefing by Mr Chas Sturt, Auckland Barrister, on ST M when the discussion came up over Bridgecorp followed by Bluechip.

Late last year EUFA made a representation (prepared by Mr Sturt) to the Commerce Mininster and Sec Com calling for ST M for BC. It is very good reading. I will try and find it to email to you BUT you will have email me at eufanz@xtra.co.nz to give me your email as I wont put the letter on this public blog.

The MED Site is worth reading to.

Hope this may be helpful to you.

What concerns me is the fact that the trustees gave into the Shareholders non negotiable terms over governing the company. They had an independant Director in greg muir and what good did that (He) do?

I am very worried about the trustees handling of this and I understand they are in this donkey deep. Votes for the boys.

I am one confused (one of many I suspect) United Finance debenture holder. I have yet to vote on the moratorium having promised my wife I would do as much research as possible before asking her to co-sign the voting form. The general drift here appears to be for receivership but I wonder about the vested interests involved (anger, revenge, take down some more tall poppies, no vested interest-just like to blog etc) I have been reading Chris Lees web site commentaries for 18 months or so and he appears to have some very pragmatic and unbiased views and advice. He recommends 'vote for the moratorium'. If his recommendation is wrong-what hope for the average 'ma and pa' investor getting it right?

Bernard replies
Chris Lee would himself acknowledge his own interests, but that doesn't necessarily disqualify his views. He recommended investors put money into Hanover and no doubt genuinely believes the moratorium option will return more money to Mums and Dads over the long run. PwC agrees with that view.

But there are many other informed views saying receivership is the best option. They tend to be from commentators in the media rather than from the financial advice community and receivership/liquidation industries. Commentators against include myself, Brian Gaynor, Bruce Sheppard and Tim Hunter.
Here are the links. They are well worth a look.

http://www.businessday.co.nz/blogs/stirringthepot/2008/11/27/hanover-dor...

http://www.interest.co.nz/ratesblog/index.php/2008/11/20/hanover-plans-t...

http://www.businessday.co.nz/blogs/bottomline/2008/11/21/hanovers-contem...

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1054...

cheers/bernard

The world according to Chris Lee:

http://www.businessday.co.nz/industries/4655951

As we know, a number of finance companies have called for moratoriums. But there is a lot more comment about Hanover than the others. Why is that?

David

You are right, I remember the Gulf Harbour (Wilkins and Davies) Receivership, I was the support consultant for their rather dodgy computer system for years, They sat on the land/sections waiting for the next property boom

Neven

Well said FYI

That message above got ya going - I was meaning for the shareholders and their supporters!

If investors buy that clap trap then they deserve the outcome. They are allowing old people to transfer the investments into kids names incase they are not here in 5 years and to stop estate issues arising. They have thought of everything.

oh Rob.... please

Guy, I think either option is bad as the other, and both have conflicts of interest. There has to be an alternatve, such as the government stepping in. We are going to end up as a third world economy at this rate, and I am seriously worried. Many mum and dad investors are now going to have to solely rely on the government in their retirement, and those that have assets are going to be income tested, as we won't have enough tax payers to support a 1st world super annuation system. The question is when it is going to happen, maybe in the next governments term.

Tui Billboard of the day - Bollard 'The recessions over' - Yeah right.

It is interesting to compare the restructure proposals which have recently been announced by failed finance companies. They all have their downsides but, in my view, Hanover's definitely comes off worst

St Laurence is over the longest term but hopes to return all investor capital in full (both secured and unsecured) plus accrued interest. St Laurence's owner has undertaken to put in an extra 10m in cash and maybe more later.

Dorchester hopes to return all investor capital in full (both secured and unsecured) over a three year term but with no interest. However, investors may share in some of the profits, if there are any, at the end of the three year term.

Strategic have not yet issued their plan but have announced that their aim is to repay all investor capital in full (both secured and unsecured) over a five year term with accrued interest.

Hanover, hopes to repay secured investors in full over a five year term. But no interest. Unsecured investors will only get half there money back, if all goes well, and no interest. The owners have undertaken to put in 10m in cash plus some property assets which, according to some expert commentators, could be liabilities rather than assets.

I just say to you all .... watch this space

i dont need to attend a roadshow and listen to more b/s i have made my desision ,i would not give these two the responsibility off walking my dog ,let alone trust them to again decide where my investment dollars go ,i vote send in the receiver ,why would i give them another chance after the stuff up we are all in ,i hope the fraud squad really investigate hanover finance ,the funds the 2 major shareholders took out is a scandle

A receiver is 2nd best to Stautory Management a receiver appointed by these trusstees would be pretty suspect.

Just back from a very nice holiday and trying to come to terms with the fact that the 'yes' vote to Hanover's moratorium has, in effect, given permission to Hanover Capital to continue operating but, at the same time, confiscating 50% of my investment in their company amounting to $25,000. Money which I had saved for my retirement and which I cannot replace. How is it that this is permitted under New Zealand law?

I was surprised to see that Nathans Finances director who is being pursued by the Securities Commission and other government departments, is John Hotchins, who is the brother of Hanovers owner and director, Mark Hotchins.
I always thought the Nathans finance and Hanovers prospectus's looked very similar in terms of their layout and branding.