KEY POINTS:
Hanover Finance chairman Greg Muir is now coming on to the front foot as the board prepares to put a rescue plan in front of investors.
Muir had been stung that columnists, including myself, had not called him first before criticising his absence from the public fray when Hanover Finance announced it had frozen investors' funds on July 23.
He contends Hanover's advice was it had been more important to get a public commitment from shareholders Eric Watson and Mark Hotchin that they were ready to put more capital into the company, rather than being the public face at that stage.
That said, Muir is now taking a more public leadership role. He was locked in discussions for much of Thursday and Friday. He had hoped to have a timetable in place before going public in today's Herald on Sunday about some of the complex issues the finance company faces.
That timetable's not too far off, but Muir wants to ensure all the ducks are lined up before committing himself to firm deadlines to which he will clearly be held accountable.
Getting investor consent to the upcoming restructuring plan will be a big call. Hanover Finance trustee Brian Connor, of Perpetual Trust, will clearly need to be in a position to confidently support the proposal if it is to fly when shareholders' votes are taken next month.
Herald on Sunday inquiries disclose independent advice has been sought from PricewaterhouseCoopers' John Waller, who has been engaged by the trustee. Waller is unlikely to support any restructuring plan unless he believes it can result in a better outcome for investors (over time) compared to receivership, and in a viable ongoing role for the company.
Waller's influence is not publicly obvious. But on past performance (it would appear) he would have been behind the requirement for Hanover's major shareholders, Watson and Hotchin, to put their names to the statement committing them to stand behind the company's upcoming restructuring.
Unlike AMP Capital, which last week instituted a freeze on its $420 million NZ Property Fund without being legally required to seek investors' permission, Hanover's difficulties are played out in public. This leaves the company vulnerable to rumour-mongering by any unscrupulous borrowers who judge it is in their best interests for the company to go into receivership.
Muir contends there is a lot of misinformation in the market. "It's incredibly destructive."
Yesterday Muir spelled out:
Hanover's high-profile shareholders - Watson and Hotchin - have about $70m in equity in the business. He emphasises the shareholders' $70m ranks behind all Hanover's creditors. This would include the investors who have some $554m tied up in debentures.
He notes Watson and Hotchin are "motivated to protect it [the $70m] and are wanting to stand behind the business - they have a lot of their own money in it... It's a huge amount of money". Muir makes the point the figures he is working off, such as the $70m, are unaudited. They will be incorporated when Hanover posts its accounts for the June 30 year.
Watson and Hotchin have taken dividends of $45m out of the business in the past 12 months. Muir assured me that "at all times" the directors were careful to ensure the capital adequacy ratios were adhered to when making the decision on dividend levels.
He says "all that money" - the $45m - plus more has since come back into the business via the shareholders. "In the past 12 months, $70m has come back into the business - $25m more than the dividends taken out."
Hanover is a property finance business. People who have criticised the company for being exposed to just one sector have neglected the fact it was always focused on property. So too, those who now complain over related party loans to the two shareholders. Muir stated the company had always been open on this score.
Hanover's related party loans to entities associated with its shareholders were made on commercial terms. The shareholders did not get preferential interest rates and have "at times complained" at better deals achieved by others who borrowed from Hanover. The loans were disclosed.
There's clearly a lot more Muir will need to put on the table as Hanover prepares to persuade investors to vote in favour of the upcoming restructuring plan.
But he reiterated Watson's and Hotchin's high profiles had resulted in the company coming more "under the microscope" than others.
He stressed the company was profitable and cash flow positive before the freeze was implemented - it was a pre-emptive move to protect the funds.
