South Canterbury Finance, the finance company owned by a company associated with Allan Hubbard, has stopped accepting deposits temporarily while it amends its investment statement and prospectus.
The government moved yesterday to place Aorangi Securities, seven charitable trusts, Mr Hubbard and his wife Margaret Hubbard, who is known as Jean, into statutory management. Mr Hubbard has criticised the move as misguided.
South Canterbury Finance is covered by the Crown deposit guarantee scheme and it has been accepted for the extended scheme.
It is owned by Southbury Corp, which is owned by Mr Hubbard and his wife, but is excluded from the statutory management.
"The South Canterbury Finance investment statement and prospectus are currently being amended," the company said on its website today.
"We are unable to accept deposits during this process, so the prospectus, investment statement and other relevant documents are temporarily unavailable," the website said.
Chief executive Sandy Maier told NZPA the company briefed ratings agencies today and was awaiting their response.
He said the company was still going to be accepting deposits but could not process, or allot them, until the documents were changed, which would take a couple of days.
This process had occurred a number of times in the past in response to events.
He confirmed that the company has been talking to new investors and that one investor has been asked to do due diligence, a process of checking the books, on South Canterbury Finance. He has declined to name the investor.
More than 400 investors and about $130 million are involved in Aorangi Securities and the trusts.
The matter was also referred to the Serious Fraud Office for possible breaches of the Crimes Act.
Companies are put into statutory management to prevent fraud and reckless company management and to protect investors.
In a statement to clients posted on the internet, Mr Hubbard apologised for what had happened.
"I am sorry that this action was taken by a government official with little consultation with myself and can only conclude that the government official has been misguided in his action."
Mr Hubbard said he had operated Aorangi Securities as a mortgage company for over 30 years and interest had been paid quarterly and the clients have suffered no loss of capital and have had a prompt return of capital.
Aorangi had mortgages and loans owed worth $126 million and $2 million cash in the bank.
Client deposits were worth $88m which left a surplus of $40 million.
"The $40 million surplus belongs to myself and family and all our equity has been subordinated to client interest, ie, the Hubbard family stands any loss before clients do," Mr Hubbard said.
"The Crown seems to believe that your capital is at risk under my management and have appointed a statutory manager whose job is to realise all the loans and repay you your capital. This will take time as it is not possible for borrowers to repay loans at short notice."
However, there were sufficient funds to pay interest due at June 30.
"If for any reason you do not receive your capital back in full and provided it is within my resources I will meet any shortfall."
Mr Hubbard said that in the past month he had been working on finding a solution to South Canterbury Finance affairs and hoped to arrange an agreement with an overseas company, subject to confirmation by June 30 to inject a large amount of capital which would place South Canterbury Finance in a secure position for the future.
"I don't believe in the history of New Zealand that any person has acted more honourably than myself."
Commerce Minister Simon Power announced the statutory management yesterday and said Mr and Mrs Hubbard were personally placed under statutory management because they were so closely related with the businesses.
The seven charitable trusts included in the statutory management were Te Tua, Otipua, Oxford, Regent, Morgan, Benmore and Wai-iti.
Mr and Mrs Hubbard were involved with Aorangi and the trusts as depositors, managers and borrowers.
"These decisions have been taken to protect investors and the matters are now in the hands of the statutory managers and the Serious Fraud Office," Mr Power said.
NZPA and NBR Staff
Mon, 21 Jun 2010