Manager says Hubbard's cupboard lacking

A stinging report by the statutory manager of Allan Hubbard's companies has identified high levels of lending to the volatile dairy sector as posing significant risk to the return of $96 million of investors' capital.

Government-appointed company Grant Thornton has told investors the value of their investments may be overstated by more than 25% in one company and another company may deliver losses.

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It has highlighted the outcome of offering free loans, unpaid interest, accumulating losses, poor governance and claims that cash balances as stated to investors do not exist.

The investigation and asset sales look set to continue, possibly for "years".

The Hubbard entities under management are now being stung by the volatility in the dairy sector and farmers' inability to repay large loans involving tens of millions of dollars.

The Government placed Mr Hubbard's assets under statutory management on June 20, and the Serious Fraud Office has launched a separate, ongoing, investigation.

Grant Thornton released its second report yesterday, hard on the heels of Hubbard supporters' increasingly vocal calls for the Government to put an end to the dual investigation.

The supporters say there was no fraudulent or misleading behaviour by Mr Hubbard and investors were suffering increasing hardship from their funds being frozen under statutory management.

Investors in Mr Hubbard's Aorangi Securities, already stressed because of the frozen funds, have been told by Grant Thornton they are unlikely to see any significant return of capital until next year, at the earliest, but a small payment may be made during October.

Mr Hubbard's widespread investments in the dairy sector are unravelling as lenders are unable to pay, leaving an estimated 50% shortfall in interest payments.

"Many of the relevant farming businesses are struggling financially. They have been unable to make payments to Aorangi,' Grant Thornton said.

"We do not yet know the exact value of Aorangi's investments in the farming industry."

Many of Aorangi's loans are to about 25 dairy farms and Grant Thornton has estimated only 17 loans out of 51 will meet their September 30 deadline interest payment obligations - a shortfall of $1 million, or 50% of what is due to Aorangi investors.