Hope yet for some Hanover projects

Hanover Finance says some of its property investments are showing signs of life, including the $1 billion Kawarau Falls hotel project near Queenstown.

The financier, operating under a five-year moratorium, has declared a net after-tax loss of $102 million for the year to June 30, 2009.

But chairman David Henry and directors Mark Hotchin and Des Hammond said they were optimistic about one of the biggest projects the business has funded.

"The Kawarau Falls Stage I hotel development which is in receivership is now expected to be completed in early 2010. It now appears that the Stage II hotel development, being a company not in receivership, may proceed given that Stage I hotel development will be completed," they said in their directors' report.

However, a letter to shareholders from auditors KPMG highlights the uncertainty around the value of Hanover investments.

Last week, Hanover Finance said debenture investors would most likely get only 70c in the dollar of their principal back over five years.

In December, investors voted to accept the debt restructuring plan under which they will be repaid more than $500 million owed to them over five years as an alternative to receivership.

KPMG, which audited the accounts, notes that "further impairment, or delay in, the expected repayment" of the Hanover loans is possible given the uncertainty of markets.

It also notes that Hanover's Trustee has the power to call in receivers if the events continue to undermine the terms of the debt restructuring plan.

If that happened adjustments may need to be made to the value of assets as reported in the latest accounts.

Henry, Hotchin and Hammond said Hanover's two largest debt exposures were Kawarau Falls and the $2 billion Five Mile, both developments near Queenstown. Excavations stopped months ago at Five Mile.

Since March, people had begun to realise the value of the Five Mile site: "The first site had town planning approval and recently the second site has received town planning approved by the council which has improved its strategic value," they said.

Realising good values on Kawarau Falls and Five Mile was "important in achieving estimated recoveries for secured depositors", they said.