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Millions of dollars in related-party loans made to Eric Watson and Mark Hotchin's property companies days before Hanover Finance froze repayments to debenture holders were part of a set of transactions that left the company and its investors better off, Hanover said yesterday.
The Watson and Hotchin-owned company and its subsidiary United Finance have long been criticised for the extent of their related-party lending to the pair's property companies.
This week, Hanover was reported to have recently lent them a further $15 million.
Axis, formerly Hanover Property, was said to have used the money to pay for sections at the Jacks Point development near Queenstown it was obliged to purchase under a long standing agreement.
Documents obtained by the Herald indicate Hanover advanced significant sums to Axis subsidiaries less than two weeks before Hanover and United said they were freezing repayments of interest and principal to 16,500 investors owed $554 million.
Yesterday, a Hanover spokesman said the amount advanced to two Axis subsidiaries on July 11 totalled $9.7 million, against just over $19 million repaid by Axis and other associated parties as part of "a contemporaneous set of loans and repayments".
The transactions had reduced Hanover's related-party exposure by just less than $1 million and its exposure to the softening Queenstown property market by about $8 million, and improved the security Hanover held over remaining loans.
"We look at it as a total corporate good," the spokesman said.
Yesterday, Hanover's independent chairman, Greg Muir, reiterated he was "comfortable" with all of Hanover's lending including that to related parties.
The lending was vetted by Muir and Hanover's other independent directors, Sir Tipene O'Regan and Bruce Gordon.
