Grant Thornton wash-up of Hubbard management costs $10m

The cost of administering the Aorangi Securities receivership has now reached $4.8 million, according to the 11th report by Grant Thornton.

Separate costs for administering Hubbard Funds Management have exceeded $4.5 million, and for Te Tua Trust, $918,457.

The statutory managers released the information their latest reports for each entity.

In relation to Aorangi Securities, the statutory managers confirmed Jean Hubbard, the wife of the late Allan Hubbard, has done “a major about turn”.

“Contrary to earlier indications”, she now plans to claim personal ownership of $60 million worth of assets for her late husband's estate.

The statutory managers say if she is successful this will drastically reduce payouts to investors.

A court hearing is set down initially for October but the matter may not be heard for a year.

Between April 2009 to March 2010, Mr and Mrs Hubbard placed 34 farm-owning assets, and shares and loans in commercial properties into Aorangi in their personal capacities, as trustees of various trusts and as company shareholders and directors.

“Mr and Mrs Hubbard indicated that their personal interests in Aorangi would rank behind the interests of the investors in Aorangi,” according to Grant Thornton.

But in March 2010 Mr Hubbard transferred the assets to several new trusts.

The statutory managers succeeded in unwinding the transfers.

Now they have filed proceedings in the High Court at Timaru for orders declaring that these assets are legally owned by Aorangi.

The statutory managers continue to seek recovery of loans and sell properties that are owned outright, plus liquidating some companies that owe money. They estimate recovery of about $39 million in loans.

Aorangi also has an investment of approximately $23 million in related Te Tua Trust.

“We have collected $6 million from Te Tua’s loan book since our appointment. All property held by Te Tua has now been sold.

"Out of a Te Tua loan book of $18 million, $10 million worth are being repaid but there is uncertainty about the balance."

Grant Thornton is also administering Hubbard Funds Management’s wind-up.

The High Court recently directed that investors should be repaid according the amounts invested.

Investors who have not withdrawn any of their original contributions will have the balance of those repaid.

After repaying original contributions, the balance of the fund will be paid to investors as a return on their investment.

Grant Thornton has been ordered to determine these returns and the High Court will finalise directions on repayment.

“This decision will have a significant impact on the determination of the amounts due for many investors...

"The investors with the largest impacts will be those who have, over time, had significant gains recorded on their statements and who have also withdrawn more funds from HMF than they have put in.”

Under this model, advocated by Mrs Hubbard, some investors have been overpaid and this means that 50 others will be affected by reclaims of about $3 million.

The statutory managers do not plan to appeal the High Court direction but some individual investors may do so. If this occurs, the managers will await the outcome before making further distributions.

The investments include stakes in Ebos Group, Mainfreight, Ryman Healthcare, Mercer Group, Smartpay, and Olympus Pacific Minerals.

The valuation of the portfolio is about $44 million. A relatively small proportion is the subject of claims from third parties.

Grant Thornton says it gets to keep only $5.076 million of the $10 million fee for the Hubbard statutory management.

The rest has gone mainly on lawyers’ fees, GST and to other parties.

The costs of administering Aorangi include $2.612 million to Grant Thornton, $1.4 million to lawyers, third-party payments of $187,000 and GST of $617,000.

For Te Tua Charitable Trust Grant Thornton picked up $569,603, lawyers $219,683, third parties $13,145 and GST took $116,026.

The Hubbard Management Funds costs include $1.895 million to Grant Thornton, $1.276 million to lawyers, $821,000 to third parties and $577,000 in GST.

An earlier report did not make the division of fees and costs clear.