Aorangi tangles mean ‘long wait’ for investors, say Statutory Managers

Legal arguments over ownership of Aorangi assets and tangled related-party lending means investors owed $96 million from Allan Hubbard’s contributory mortgage scheme are in for a long wait and may need to take action against Mr Hubbard to escape massive losses.

The seventh report by statutory managers Grant Thornton in Aorangi Securities said recovery efforts has been hampered by disputed asset-transfers and while an 8c in the dollar would soon be paid to investors further recoveries were some time away.

“Investors will have a long wait for repayment on investments because assets purported to have been transferred to Aorangi may still be owned by Mr and Mrs Hubbard,” the statutory manager said.

Mr Hubbard made a much-publicised pledge to subordinate his $60 million stake in Aorangi, but statutory managers note these asset transfers were “introduced by way or journal entry.”

The statutory managers said legal advice meant they could not rely on this purported transfer, and the assets may also be subject to claim by other creditors to Mr Hubbard.

The possibility of a claim being taken by statutory managers acting for Aorangi investors against Mr Hubbard was flagged.

Statutory managers are also challenging the transfer of $110 million in bad debts from South Canterbury Finance to Mr Hubbard in return for his ownership share of 21 farms.

The managers said South Canterbury had agreed that court action was needed to provide direction as to who is the beneficial owner of these assets.

“A further complication on the ownership is the position of the other owners of the 21 farms who were not aware of the action taken by Mr and Mrs Hubbard in unilaterally transferring their interests for the benefit of South Canterbury Finance,” the managers said.

Statutory managers said the $110 million in bad debt had only provided $500,000 in returns since their appointment one year ago.

Related-party links were exposed in review of the Aorangi loan portfolio conducted by statutory mangers.

"We have identified a very different investment profile in 2007 when Aorangi had $82 million invested in South Canterbury to June 2010 when it had $60 million invested with business entities associated with Mr Hubbard," the report said.

Aorangi records at 31 March 2009 had total assets of $114 million, including: $12.2 million in South Canterbury; $33.6 million in Southbury, and; $13.7 million in Te Tua Trust.

The report said $14 million worth of farm assets had been sold, and an additional $20 million was expected from farm sales in the next three months.

Additional immediate returns were further compromised by the statutory manager’s decision to refinance 11 farms that faced receivership action by banks.

The managers said $10 million was invested to the group of farms, and this would increase Aorangi’s exposure to $22.5 million.

Last week Mr Hubbard was charged by the Serious Fraud Office with 50 counts fraud in relation to his management and accounting of Aorangi and Hubbard Management Funds.