Hanover Finance not keeping to repayment plan

Shareholder Mark Hotchin has said that Hanover remains committed to providing the best possible result for investors. Photo / Brett Phibbs

Hanover Finance is no longer likely to fully repay investors under a debt restructuring plan due to a deterioration in the commercial property development market.

Directors today estimated the return to secured depositors is likely to be about 70 cents in the dollar for Hanover Finance investors.
Investors in subsidiary United Finance can expect estimated returns of around 90c.

"At this stage, we are unable to forecast any repayment for subordinated note and bond holders," chairman David Henry said.
This will depend on whether further loan provisioning was required, he said.

Investors voted in December last year to accept the debt restructuring plan (DRP) under which investors are repaid more than $500 million owed to them over the next five years as an alternative to receivership.

A PricewaterhouseCoopers report said the repayment plan was optimistic but was a better option than putting the company into receivership.
Secured investors have already been paid 6c under the repayment plan, Mr Henry said.

Shareholder Mark Hotchin said, despite this negative development, Hanover remained committed to providing the best possible result for investors.

Mr Hotchin was criticised last year for holding a lavish 50th birthday party in Fiji, while Hanover co-founder Eric Watson also held a 50th birthday party in Istanbul.

Mr Henry said that a rapid deterioration in the commercial property development market and requirements under the International Financial Reporting Standards meant Hanover's result for the year ended June 30, 2009 would fall short of expectations.

"As we reported to investors in September, property market indicators are still moving in a negative direction. When Hanover entered into the DRP last year we anticipated the property market stabilising and potentially showing signs of recovery in late 2009 early 2010.

"However, there has been a significant deterioration in the property development sector resulting in a disconnection between property valuations and the market value of assets."

Many borrowers were unable to repay or refinance their loans as they fell due.

Directors were attempting to reach an appropriate balance between collecting sufficient funds to meet the repayment schedule under the DRP, and adding value to those loans.

- NZPA