Brian Gaynor Blog

Mark Hotchin and Hanover Finance have failed to deliver once again as investors will receive much lower recoveries than indicated a year ago.

The planned repayments schedule, which was approved on 9 December last year, was as follows; 

The expected recoveries have been slashed to:

-         Hanover Finance investors will receive 70 cents per 100 cents instead of the full amount

-         United Finance investors will receive 90 cents instead of 100 cents

-         Hanover Finance subordinated note and bond holders will receive nothing instead of the forecast 50 cents.

Three 2 cent payments have been made to date and a further 2 cent payment will be made on 31 December as planned. However the bulk of the payments were supposed to be made at the end of 2012 and 2013 and investors are not expected to receive full payment on these dates.

The moratorium was highly controversial because the Exploratory Memorandum presented a full repayment schedule, as outlined in the table above, yet PricewaterhouseCoopers stated “we believe that the likely level of loan recoveries will be lower than those forecast by management, such that the payments to Hanover Finance secured depositors as a result of forecast loan recoveries and asset realisations ...  may be somewhere between 60 cents and 83 cents”.

Nevertheless PricewaterhouseCoopers recommended the moratorium over receivership because of additional support promised by Hanover’s shareholders. According to Greg Muir, the chairman at the time of the meeting, “Hanover’s ultimate shareholders have agreed to provide further financial support of up to $96 million for the debt restructure plans. The support package comprises $36 million of immediate cash value, a further $40 million (based on directors’ valuation) of net equity in property assets contributed from the shareholders’ AXIS Property Group and up to $20 million of addition cash during the balance of the restructure period”.

Little information is available on this $96 million of financial support.

Has it been received?

Is it real or just more smoke and mirrors from Hanover’s shareholders?