KEY POINTS:
"A bird in the hand's better than a bird in the bush," PricewaterhouseCoopers partner John Waller told the Hanover and United Finance investors' meeting yesterday.
It's a sentiment the careworn investors obviously took to heart. After the packed event at Ellerslie racecourse the news came through that over 90 per cent of the total 16,500 investors had voted to accept owners Eric Watson and Mark Hotchin's restructuring plan, as opposed to putting the companies into receivership.
It was a day for cliches. "I listened to it all, and really you've only got one way to go, and it's between a rock and a hard place," said Meg Murray of Milford on her way back out into the Auckland drizzle.
Owed a collective $527 million, 93 per cent and 94 per cent of Hanover and United debenture holders respectively voted for the proposal, which aims to repay them 100c in the dollar over five years. Hanover subordinated noteholders, owed a further $26 million, and capital bondholders also voted in favour of the plan.
Clutching copies of the explanatory memorandum, investors made it clear from their questions that they had considered the debt-restructuring proposal carefully.
A United investor demanded to know about the so-called Axis properties, which Hotchin and Watson are contributing towards the $96 million rescue package. They insist the properties have a value of $40 million - independent reviewers of the package PricewaterhouseCoopers believe it is less.
The Axis companies carry a lot of debt, the investor pointed out - would this also be transferred to Hanover and then become the ailing finance company's problem? Hotchin assured her that he and Watson were passing on only the assets, not the liabilities.
One debenture holder, with $100,000 invested, queried the high level of second mortgages on Hanover's loan book - around 65 per cent, by Hotchin's own reckoning.
Another pointed out PWC's disclaimer in its evaluation that it had relied on figures supplied by Hanover.
One asked what happened to an investor's estate if they died before the five-year payout was complete. In between the questions there was the expected anger and remarks about the shareholders' wealthy lifestyles.
"Why hasn't he [Hotchin] put his Waiheke property and his Paritai Drive property into this issue if he's really serious?" asked Charlie of Havelock North.
"If necessary, will you sell these properties to pay us back our money?" demanded Glen Stanton of Milford, whose family has a total $255,000 invested with Hanover. Hotchin told the gathering his Waiheke property had already been pledged as part of his guarantees, but the unfinished Paritai Drive mansion was to be his family home. "I don't intend to sell it as part of this process if I can avoid it."
In the end, what investors were voting on was trust, pointed out one.
From the brief details investors gave of their situation, it was clear how much they had trusted Hotchin and Watson. One man, whose family trust had had money invested with Hanover and its precursors for 14 years, deposited a further $100,000 with the financier just two weeks before it announced its moratorium on July 23.
Despite its reliance on retail debenture funding, its concentration of second tier loans to property developers, the capitalisation of most of those loans and the huge dividends it paid, Hanover continued to insist yesterday that it was a victim of the property downturn and the collapse of the finance company sector. The failures of Dorchester Pacific Finance, Dominion Finance and St Laurence, all at the end of June, were "the straw that broke the camel's back", chairman Greg Muir said.
"What I can tell you, hand on my heart with absolute honesty, every single month from when things started to look a little curious, maybe the end of 2007, indeed until about June, we were still quite confident that we could pay you back," he told the meeting.
* The payout:
Hanover and United Finance debenture investors are to be paid out over five years.
Payments start at 2c in the dollar a quarter next year, rising to 2.5c in 2010, 3c in 2011 and 8.75c a quarter over 2012 and 2013.
If the companies default on two payments in a row a receiver can be appointed.
