UPDATED: As Hanover Finance engages in trench warfare with Allied Farmers, the Securities Commission says it is nearing the end of its investigation into the Eric Watson and Mark Hotchin-owned companies.The commission said its investigation into Hanover F
UPDATED: As Hanover Finance engages in trench warfare with Allied Farmers, the Securities Commission says it is nearing the end of its investigation into the Eric Watson and Mark Hotchin-owned companies.
The commission said its investigation into Hanover Finance, United Financeand Hanover Capital has been complex and involves a team including investigators, forensic accountants, financial analysts and lawyers.
“Commission members will meet before Christmas to decide whether criminal charges will be laid against directors of the companies., a statement said.
“Although no decision has yet been made, it is likely any charges will be laid in the new year.”
Meanwhile, Hanover Finance has accused Allied Farmers of blaming others for its own mismanagement, failing to deliver promises to shareholders and forcing Matarangi Beach Estates into receivership.
In a statement authorised by Hanover Finance director David Henry, the company said the Allied board had failed to fulfil their obligations made to investors after taking over the assets of Hanover last December.
“It is with regret that we have for nearly 12 months now seen the continued deterioration of the value of the assets transferred whilst under the management and ownership of Allied,” the statement said.
“Noticeably the promises and commitments made by Allied have failed to materialise, and these assets seem to have been sold with urgency to meet the distress in Allied's own financial position with the obvious adverse consequence to the former Hanover investors.”
Since December Allied Farmers has written the value of the hanover loan book from $396 million to $95 million, while posting a loss of $77.6 million for the year to June 30.
Allied's share price has fallen to below 2c.
The outburst follows a statement from Allied Farmers yesterday announcing the receivership of Matarangi Beach Estates – a golf course and development property transferred as part of a shareholder support package pledged by its owners Mark Hotchin and Eric Watson.
Both Mr Hotchin and Mr Watson are reportedly back in the country this week.
In its statement to the stock exchange Allied Farmers accused Hanover of providing unrealistic valuations of its assets prior to the takeover last December.
''It seems obvious to us that the value of these assets in the audited 30 June financial statements, on which Hanover debenture holders were entitled to rely at the time of acquisition, was unrealistic, as there is no way that the market for this type of asset has deteriorated that much in such a short time frame,'' Allied managing director Rob Alloway said.
He said Matarangi Beach Estates (MBEL) was valued at $26.1 million as at May this year, resulting in a carrying value net of debt on Allied's books of $7.9 million.
That compared with a $45.8 million gross value attributed to the asset in Hanover's June 30, 2009, financial statements.
''It is also disturbing to us that in the days leading up to the receipt of the repayment demand from HSBC we were, with the knowledge of HSBC, approached by Mr Kerry Finnigan, representing an entity owned by Messrs Hotchin and Watson, proposing a purchase of the [Matarangi] assets for the loan value of circa $19m,” Mr Alloway said.
That approach was made with the knowledge of HSBC, which cancelled the loan facility when the offer was rejected, he said.
In its statement, Hanover Finance said Allied recently stopped paying the interest and fees on the HSBC facility and advised HSBC that it had no further interest in the asset.
That led to the appointment of Grant Graham and Michael Stiassny of KordaMentha as receivers of MBEL.
“The HSBC facility was guaranteed by Axis Property Group Holdings Ltd and HFP Investments Ltd (in liquidation), companies related to Hanover. These entities have limited financial resources since the assets they held previously had already been transferred to Allied, Hanover said.
“In a confidential meeting with Rob Alloway, and with HSBC's knowledge, a proposal was put forward whereby, if Allied was no longer prepared to support the asset financially, then parties associated with Hanover would look to assist the bank. Their interest in doing so was to assist HSBC to secure repayment of its debt.
“Hanover believes that Rob Alloway and the rest of the Allied board have managed the assets poorly, failed to fulfil their obligations made to investors, and need to start taking responsibility for their own actions rather than blaming others.”
