Latest Hubbard report grim reading for investors

Allan Hubbard put up investment securities held by Hubbard Management Funds (HMF) as security for his personal borrowings, according to the latest statutory managers report.

The report also states other shares were held for the benefit of HMF by companies that are now in receivership.

Investors in HMF have been told not to expect any form of distribution until 2012 as statutory managers from Grant Thornton continue to manage the fund.

The sixth report is grim reading with the value of the fund calculated at $48.75 million as at January 31, a far cry from the $82 million shown in statements provided by Mr Hubbard last March.

After some restructuring of the portfolio, including selling some shares in Pike River Coal before its receivership, the statutory managers have identified a shortfall of about $31 million on the March 2010 statements.

“In our opinion, investors will suffer a considerable loss compared with what was shown on their statements as at 31 March 2010,” the report said.

Among the issues are that some of the shares recorded as belonging to HMF are subject to possible claims by third parties, in competition with HMF investors. These shares have not been included in the portfolio value.

“Some of the shares subject to claim have been pledged as security to financiers for borrowings made by Mr Hubbard or parties related to him,” the statutory managers said.

“Other shares are held for the benefit of HMF but on the face of it the companies appearing to own the shares are in receivership.”

It was hoped that about $2 million worth of shares could be “rescued” in the next month or so.

It is now nearly nine months since Richard Simpson and Trevor Thornton of Grant Thornton were appointed statutory managers to HMF, Aorangi Securities and a number of charitable trusts, along with Mr and Mrs Hubbard.

A sixth report on Aorangi is expected in the next few days.

The latest report noted the difficulty of realising some of the investments in HMF, including venture capital style holdings, which required further calls on capital.

In February this year the managers invested a further $1 million in Mercer Group as part of a recapitalisatiopn and rights issue.

Previous reports have noted a lack of paper work around the investments.

During the latest reporting period the statutory managers continued to tidy up administrative issues within the portfolio.

“This has included moving holdings that were not in the correct entity and working with the receivers of South Canterbury Finance and Southbury Group to recover assets registered in those companies’ names.

Mr Hubbard was the main shareholder of South Canterbury, which collapsed last August triggering a $1.6 billion call on the government's retail deposit guarantee.

The Serious Fraud Office is investigating Aorangi Securities and is looking at several transactions involving South Canterbury Finance.