Hubbards may still control $60m - asset managers

Aorangi Securities Ltd and Hubbard Management Funds statutory managers say $60 million may still be technically controlled by Timaru financier Allan Hubbard, and his wife Jean.

"Timing of future returns to Aorangi investors is unclear because of uncertainty around ownership of approximately $60 million of assets in Aorangi Securities," the statutory managers, Richard Simpson, Trevor Thornton and Graeme McGlinn, of Grant Thornton, said today in their seventh report to investors.

They continued to finalise issues and stabilise the complex farming interests associated with the Hubbards but the complexity of third party loans and investments recorded by Aorangi Securities to businesses related to Hubbard meant the schedule and amount to be paid to investors was unclear.

The statutory managers expected to distribute 8c in the dollar to Aorangi investors in July 2011, but this was dependent on the repayment of a refinancing loan.

Earlier in the year they told Aorangi investors to expect a further 10 cents in the dollar at the end of June, after receiving 3c last October.

The 8c was less than expected because of the difficulty in collecting loans and sorting out ownership issues relating to various farms.

"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 managers said.

"If it is established that the Hubbard interests remain in the ownership of Mr and Mrs Hubbard, those assets will not be directly available to Aorangi.

There could instead be a claim by Aorangi as lender against the Hubbards as borrowers from Aorangi at a value of close to $60m.

"With the financial positions of Mr and Mrs Hubbard being uncertain, there is potential for a loss to be incurred by Aorangi investors, who will rank with the other creditors of Mr and Mrs Hubbard," the report said.

Hubbard Management Funds (HMF) held its value over the last quarter, while progress was made moving investments into more blue chip entities.

Restructures had enabled farming interests to be packaged in a marketable form and they had sold interests in a number of farms at, or exceeding valuation, for over $14m, and a further $10 million was expected about now from sale of other farm interests.

"We would expect additional realisations in the next three months to exceed $20 million," the managers said. "Presuming the beneficial ownership of the interests can be determined, some or all of those realisations should be available for distribution to Aorangi investors".

The statutory managers are challenging an arrangement that Hubbard purported to implement with South Canterbury Finance which broadly involved him introducing assets indirectly for the benefit of SCF in return for $110m of bad debts in the company.

The return from these bad debt loans since the start of statutory management was about $500,000.

The security given to SCF was over the Hubbards’ ownership interests in 21 farms, and it had been agreed with SCF that the courts be asked to provide directions as to who was the beneficial owner of these assets.

A further complication on the ownership was the position of the other owners of the 21 farms who were not aware of the action taken by the Hubbards in unilaterally transferring their interests for the benefit of SCF.

This was done without reference to the other parties even though there were partnership agreements and company constitutions that required shareholder approval before shares were transferred.

Some investors had asked for individual investor statements as Hubbard had done in the past.

"It appears the statements issued to investors have contained errors with, potentially, a $31m dollar shortfall of assets when compared with all investor statements as at March 31," the managers said.

They expected to file papers with the court by the end of September, but a hearing is unlikely this year.

The cost of the total administration to the end of May for Aorangi, Te Tua Trust and HMF was $4.9 million.