Hanover Finance

Last updated

Hanover Group
Private
Fate Receivership
PredecessorElders Finance
Founded1999 (1999)
Defunct2010 (2010)
Headquarters
Auckland
,
New Zealand
Area served
 New Zealand
Key people
 Mark Hotchin, Eric Watson
Services Property development
Subsidiaries
  • United Finance
  • Nationwide Finance
  • FAI Finance

Hanover Finance was a New Zealand non-bank finance company that focused on lending for high-risk property development that failed in 2010 under the leadership of Mark Hotchin. At the time of its failure it was the largest finance company in New Zealand. The Hanover Group [1] also had interests in property and was responsible for developing Matarangi Beach Estates and golf course, and acquired completed lots at the Jacks Point property sub-division [2] in Queenstown. The Group also had property and finance interests in Australia. [3]

Contents

History

Mark Hotchin and business partner Eric Watson bought Elders Finance in 1999. Elders, and a number of other finance companies, were brought together to create Hanover Group. [4] With $650 million in assets, [4] this was New Zealand's third largest finance company at the time. In 2007, Forbes listed Hotchin and Watson as the 33rd and 34th richest people in New Zealand and Australia. [5]

Hotchin's interests ranged outside the traditional finance company model. In 2003 Hotchin through the Hanover Group bought a 10% stake in Tower, [6] a large fund management and insurance business. Hanover wanted a better deal for investors and forced Tower and owners GPG to review the capital raising and underwrite deal they had agreed.

In 2007 Hanover Group made an after tax profit of $105m. Controversially Hanover Finance paid NZ$45.5 million in dividends to Hotchin and Watson in the year ending 30 June 2008. [7] [8] Much of these dividends were then reinvested back into the company to reduce related party transactions, which at the time were around 14% of the loan book.

Start of decline 2008

As a result of the continuing worsening global financial crisis in July 2008 Hanover Finance and United Finance froze repayments of NZ$554 million owed to 36,500 investors. [9] After a vote over 85% of investors agreed to a debt repayment plan for the return of their capital over a 5-year time scale, predicated on the recovery of the New Zealand property market. Hotchin and Watson pledged a property, benefits and cash package worth up to $96m [10] to investors as part of the deal. By November 2009 accountancy firm PwC estimated that the package had fallen in value to between $36 million and $56 million, due to a fall in property prices. [11] Over the first year of the debt repayment plan, six cents in the dollar was repaid to investors, however the property market had continued to worsen and it appeared the company was heading for receivership. [11]

In 2009 Hanover was approached by Allied Farmers to buy the assets of Hanover Finance and United Finance, effectively held in limbo by the repayment plan. [11] In December 2009 Hanover Group debenture holders, note holders and bond holders were given another opportunity to vote for receivership or for the new plan with Allied. [12] 75% voted in favour of swapping their debentures, notes and bonds for shares in Allied Farmers Limited. This transaction resulted in Allied Farmers assuming the net asset position of the Hanover Group finance companies.

Failure

Allied Farmers put their finance company Allied Nationwide into receivership on 20 August 2010 and as at March 2011 shares in were worth only a fraction of what they were traded for. [13]

Aftermath

In late December 2011, the Financial Markets Authority (FMA) announced that it proposed to file civil proceedings against the directors and promoters of Hanover Finance Limited and other companies relating to statements made in the December 2007 prospectuses and subsequent advertisements. [14]

As a result of the FMA's announcement former Hanover Finance's chairman Greg Muir issued a media statement saying that "the FMA investigators were given a substantial amount of evidence demonstrating that the directors conducted themselves responsibly, with appropriate rigour, and made judgments they believed were in the best interests of the company and its investors on the information available to them at the time." [15]

In December 2012, the remaining property assets of Hanover and United Finance (with a book value of $13.5 million) were transferred from Allied Farmers to Crown Asset Management, the entity set up to hold assets from failed finance companies backed by the Government's deposit guarantee. [16]

See also

Related Research Articles

Tranz Rail, formally Tranz Rail Holdings Limited, was the main rail operator in New Zealand from 1991 until it was purchased by Toll Holdings in 2003.

Mercury Energy New Zealand electricity generator company

Mercury NZ Limited is a New Zealand electricity generation and electricity retailing company. All of the company's electricity generation is renewable. It owns and operates nine hydroelectric generating stations on the Waikato River and five geothermal plants in the Taupo area.

The Overseas Investment Office is the New Zealand government agency responsible for regulating foreign direct investment into New Zealand.

KiwiSaver

The KiwiSaver scheme, a New Zealand savings scheme, came into operation from Monday, 2 July 2007. Participants can normally access their KiwiSaver funds only after the age of 65, but can also use them as a deposit for a first home.

Mainzeal

Mainzeal Property and Construction Ltd was one of the leading New Zealand property and construction companies until being placed into receivership on 6 February 2013 and then being placed into liquidation on 28 February 2013. According to its website, Mainzeal has been involved in delivering $7.5 billion of construction projects across New Zealand and employs 400+ people. It is held by Richina Global Real Estate which is part of Richina Inc, an independent and closely held New Zealand-headquartered Asia Pacific holding company.

Fairfax Media Australian media company

Fairfax Media was a media company in Australia and New Zealand, with investments in newspaper, magazines, radio and digital properties. The company was founded by John Fairfax as John Fairfax and Sons, who purchased The Sydney Morning Herald in 1841. The Fairfax family retained control of the business until late in the 20th century.

The Securities Commission was an independent Crown entity of the government of New Zealand and the main regulator of investments. It was replaced on 1 May 2011 by the Financial Markets Authority.

Eric Watson is a New Zealand businessman, now resident in London. In 2011, the National Business Review listed Watson as the 21st richest New Zealander. However, he has been removed from the 2019 NBR Rich List due to his wealth being hit by business failures and legal disputes.

Bridgecorp Holdings

Bridgecorp Holdings Ltd is a former high-risk property development group that was operating in New Zealand and Australia. It was placed in receivership in July 2007.

CraFarms is a group of companies of which Allan, Beth and Frank Crafar were Directors. Crafar Farms was New Zealand's largest family-owned dairy business. The family business owned 22 dry stock and dairy farms with approximately 20,000 cows in various regions of the North Island, and was put into receivership in October 2009. Crafar Farms was involved in multiple prosecutions for pollution offences and incidents of poor animal welfare from 2007 to 2011.

Allan Hubbard (businessman) New Zealand businessman

Allan James Hubbard, QSO was a businessman who lived in Timaru in the South Island of New Zealand and was the founder of South Canterbury Finance, New Zealand's largest locally owned finance company. In 2006, the New Zealand Listener described Hubbard as the most powerful businessman in the South Island.

Mark Stephen Hotchin is a New Zealand former property developer and financier. He was a director of the failed Hanover Group which owned a number of finance companies including Hanover Finance, United Finance, Nationwide Finance and FAI Finance.

Financial Markets Authority (New Zealand)

The Financial Markets Authority (FMA) is the New Zealand government agency responsible for financial regulation. It is responsible for regulating all financial market participants, exchanges and the setting and enforcing of financial regulations.

<i>Downsview Nominees Ltd v First City Corp Ltd</i>

Downsview Nominees Ltd v First City Corp Ltd [1992] UKPC 34 is a New Zealand insolvency law case decided by the Judicial Committee of the Privy Council concerning the nature and extent of the liability of a mortgagee, or a receiver and manager, to a mortgagor or a subsequent debenture holder for his actions.

South Canterbury Finance was New Zealand's largest locally owned finance company when it collapsed in August 2010, triggering a $1.6 billion bail-out of investors deposits by the New Zealand Government; almost $1b was recovered by receivers.

Harmoney Limited is a New Zealand and Australian lending service which originally started with peer-to-peer lending but no longer serves retail investors. It is headquartered in Auckland with offices in Sydney. Harmoney operates by connecting individuals who want to borrow with individuals who want to invest. Harmoney provides unsecured personal loans up to $70,000 on a range of terms and competitive interest rates.

Scentre GroupLimited is a shopping centre company with retail destinations operating under the Westfield brand in Australia and New Zealand. The corporation undertakes ownership, development, design, construction, funds/asset management, property management, leasing, and marketing activities for its centres. The group was created in June 2014 when the Westfield Group separated its American and European businesses from its operations in Australia and New Zealand. The company is listed on the Australian Securities Exchange and had a shopping centre portfolio that includes investment interests in 41 shopping centres across Australia and New Zealand in 2019, encompassing around 12,544 retail outlets and total assets under management in excess of A$39.4 billion in 2015.

Finance company collapses, 2006–2012 (New Zealand)

Between May 2006 and the end of 2012 there were sixty-seven finance company collapses in New Zealand; including companies entering into liquidation, receivership or moratoria. An inquiry by the New Zealand Parliament estimated losses at over $3 billion that affected between 150,000 and 200,000 depositors. The most high-profile collapses were South Canterbury Finance, Hanover Finance and Bridgecorp Holdings. The collapse radically reduced the size and importance of the non-bank finance sector in New Zealand. According to the Reserve Bank, at the height of financial expansion prior to the 2007 crisis, non-bank lenders had assets of about $25 billion and made up 8 percent of lending by financial institutions. By late 2013 the size of the finance sector was half its previous size and accounted for only 3 percent of institutional lending. In the years following the beginning of the collapses, sweeping legislative and regulatory changes were made, aimed at improving oversight and regulation of the finance industry.

Kiwi Property Group

Kiwi Property Group Limited is a New Zealand NZX-listed company, formerly a real estate investment trust, that owns many properties throughout New Zealand; including the Sylvia Park Business and Shopping Centre, and the Vero Centre. It is also New Zealand's largest-listed property fund.

Ngāi Tahu Holdings Corporation Limited is owned by the Ngāi Tahu iwi of the South Island of the New Zealand. Its main interests are in tourism, fisheries, property and forestry and it is among the wealthiest iwi in New Zealand. Ngāi Tahu annually contributes more than $200 million to the South Island economy. Exclusive to the Maori Economy, Ngāi Tahu has an Exclusive Economic Zone that covers more than 80 percent of the South Island

References

  1. ↑ "Net profit up 20% for Hanover Finance". Scoop. 11 March 2007.
  2. ↑ Hutching, Chris (12 December 2008). "Spring thaw at Jacks Point?". National Business Review.
  3. ↑ Freeman, Glenn (14 September 2006). "Hanover profit linked with boosted Australian loan book". Money Management. Archived from the original on 1 October 2011.
  4. 1 2 Taylor, Phil (19 February 2011). "Mark Hotchin: The man behind the money". New Zealand Herald.
  5. ↑ Doebele, Justin; Allison Fass (12 February 2007). "Australia and New Zealand's 40 richest". Forbes.
  6. ↑ "Hanover increases Tower stake and ante". ShareChat.co.nz. 14 July 2003.
  7. ↑ O'Sullivan, Fran (18 August 2010). "Still waiting for answers on $45 million". New Zealand Herald. Retrieved 6 March 2011.
  8. ↑ Gaynor, Brian (4 March 2011). "Message to Hotchin – own up or shut up". New Zealand Herald. Retrieved 6 March 2011.
  9. ↑ Macalister, Philip (20 November 2008). "Hanover details plans". Good Returns.
  10. ↑ Slade, Maria (6 December 2008). "I feel a moral obligation to help – Hotchin". New Zealand Herald.
  11. 1 2 3 "Allied's Hanover deal better than receivership". Good Returns. 30 November 2009.
  12. ↑ Gay, Edward (16 December 2009). "Hanover investors look to future after yes vote". New Zealand Herald.
  13. ↑ Hunter, Tim (20 August 2010). "Receivers appointed to Allied Nationwide Finance". Dominion Post.
  14. ↑ "FMA to file civil proceedings against directors and promoters of the Hanover group" (Press release). Financial Markets Authority. 15 December 2011. Archived from the original on 8 February 2013. Retrieved 28 April 2012.
  15. ↑ "Greg Muir Statement responding to FMA".
  16. ↑ McBeth, Paul (22 December 2012). "Crown entity takes Allied properties". The New Zealand Herald. Retrieved 1 January 2013.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.