Warning over some loans

Statuary managers combing through the business interests of Allan Hubbard have warned investors some loans may be impaired and may have no securities registered against them, and in the short term they should not expect any return of capital.

Another investment company, Hubbard Management Funds, estimated to be worth $70 million, has had its assets frozen by the statutory managers, alongside eight earlier entities placed under management.

In a shock move, Mr Hubbard and his wife and the eight business entities including Aorangi Securities Ltd, were placed in statutory management by the Government on July 20.

The managers, Grant Thornton New Zealand Ltd, delivered their first report late yesterday, which they described as a "brief statement" on findings.

The statutory management has no bearing on South Canterbury Finance, which was founded by Mr Hubbard and which is undergoing a massive restructuring, but it has focused investor scrutiny on rolling over their debentures and bonds with SCF.

The managers said there was "clear evidence" that the affairs between Aorangi, the Te Tau Trust and Mr Hubbard were "intricate and complex relationship"; the assets could remain frozen "for some months" as a fuller review was undertakenThe managers outlined Aorangi Securities Ltd received $96 million from 400 investors, with the company having total assets of $132 million, with the majority invested in Hubbard-related interests.

"It appears over $106 million is invested in, including by loan to, businesses and charitable trusts where Mr and Mrs Hubbard have a direct or indirect financial interest," the managers said.

Under a heading "Investments at risk", the managers said, "Some investors, who believed their investments were secured over land, may not in fact have this security."

A "number" of investors had provided formal authority to Aorangi with "specific direction" on how funds were to be invested, while a limited number signed authority for investment in a contributory first mortgage over land.

Depositors in Aorangi or Hubbard Management Funds were not covered by the Crown's retail deposit guarantee scheme, the managers noted.

Depositors with South Canterbury Finance were covered.

"The levels of investments in, including loans to, businesses associated with Mr and Mrs Hubbard without registered security is of concern," the managers said in the report.

Both Aorangi and the Te Tua Trust had loans which could be impaired, meaning in both instances there were risks Aorangi might not recover all the money due to it, the managers said.

The Te Tua Trust had borrowed money from Aorangi, for interest-free loans to a "range of business people" and the managers were taking steps to recover arrears on the portfolio of about 170 loans.

They said the accounting systems of Hubbard Management Funds were "not adequate" and there was no fund management software used where the entire portfolio could be balanced on a daily basis, or investor position statement of market value generated.

"Mr Hubbard has maintained the client investment records manually by way of a handwritten cashbook and journal entries, which are then posted to an electronic ledger account," the managers said.