Hanover calls in lawyers on Allied Farmers

Rob Alloway (left), managing director of Allied Farmers, and Mark Hotchin, co-owner of Hanover Finance, at the 2008 meeting when investors swapped debenture stock for Allied shares. Photo / Paul Estcourt

Hanover Finance has called in the lawyers to pursue Allied Farmers over allegedly attempting to "evade various contractual obligations to Hanover."

Hanover has also disclosed it is now assisting the authorities looking into the finance company's failure.

Hanover convinced its investors to swap their debenture stock for shares in Allied.

It accused Allied of "raising loan transactions with outside parties" and is "pursuing legal action against Allied and its subsidiaries to enforce their defaults."

Independent director David Henry, the only other director along with Mark Hotchin, said Hanover is cooperating with "various regulatory authorities and their information requests."

Last week, the Securities Commission said it will decide on whether to prosecute Hanover's directors by Christmas following a major investigation into the firm and its affiliates, United Finance and Hanover Capital.

Allied managing director Rob Alloway took a swipe at Hotchin and his business partner Eric Watson after HSBC called a $19 million loan on Matarangi Beach Estates, saying former Hanover and Strategic Finance chief executive Kerry Finnigan offered to buy the assets at the loan value.

The property vehicle, which was pumped into the Hanover books by Watson and Hotchin in a bid to shore up its equity, was sent to the receiver last week.

In July, Allied accused Hanover of breaching the terms of their debt-for-equity swap, and refused to pay the last $5 million or any future obligations relating to the deal.

Shares in Allied rose 0.02 cents to 2.1 cents in trading today.