Eric Watson. Photo / Kenny Rodger
Former Hanover owners Mark Hotchin and Eric Watson have decided they will no longer hit up mum and dad investors for cash because it's "too hard" without the Government guarantee.
Mr Hotchin wrote to investors in finance company FAI Money this week telling them they would be repaid early and
the company would no longer be raising money from the public to fund its lending.
FAI Money, which lends to consumers to buy goods like fridges and televisions, is covered by the Government's deposit guarantee scheme. But Mr Hotchin said the company was too small to get a rating to be eligible for the Government's extended guarantee starting on October 12.
"Without that it would have been too hard," he said.
The company had decided to pay investors back early rather than wait for the guarantee to expire.
Mr Hotchin denied pressure in the media had forced FAI Money to stop borrowing from the public and said the decision had been made before the end of last year.
Business commentator Brian Gaynor, who slammed Hotchin in the Weekend Herald for continuing to target mum and dad investors, said the change of heart had come as no surprise.
"If a lot of finance companies are finding it hard to raise money they [Hotchin and Watson] are going to find it even harder."
The days of finance companies using public money to fund their lending were over for now, he said.
Hanover Group froze the funds of more than 16,000 investors worth more than $500 million in 2008. In March last year Hanover Finance sold its stake in FAI Money to interests associated with Watson and Hotchin just months before they did a deal to sell Hanover Finance and United Finance to NZX-listed Allied Farmers.
Last week Allied wrote-down the assets of Hanover by $220 million.
