Investors in the Hubbard Management Fund (HMF) have
received their first payment since it was frozen in statutory
management 21 months ago, just before southern lending giant
South Canterbury Finance began unravelling.
Following High Court agreement, statutory managers Grant
Thornton last week paid out $9 million to HMF investors in an
interim distribution with a further $3 million available to
be paid out, after the next court hearing in late May.
The full $12 million payments equate to 13.4c in the dollar
for investors, given the HMF portfolio was valued in investor
statements at $89 million 24 months ago.
While Grant Thornton statutory manager Graeme McGlinn said
yesterday he was "keenly aware" many investors needed their
funds as soon as possible, it would be "several years" before
payouts were completed.
"Once the court decision [from May] is known, the statutory
managers can sell down the balance of the [HMF] portfolio in
an orderly way for investors, and distribute it in accordance
with the court's guidance.
"This will happen over several years, as many of the
investments are long term," Mr McGlinn said in the managers'
10th report on HMF yesterday.
Later this month, claims covering $2.1 million in shares will
be heard in the High Court by financiers alleging the shares
were loan securities provided by Mr Hubbard, which Grant
Thornton said it would "vigourously defend".
In June 2010, the Government placed South Canterbury founder
Allan Hubbard, and his wife Jean, HMF and Aorangi Securities
and seven trusts in statutory management. South Canterbury
went into receivership that August, triggering the Government
to make a full settlement of $1.6 billion owed to 35,000
investors under its retail deposit guarantee scheme.
A year on, Mr Hubbard faced 50 fraud allegations by the
Serious Fraud Office over HMF and Aorangi Securities, but
following his death on September 2 last year in a motor
accident near Oamaru, the charges were dropped and Hubbards
were released from statutory management.
In March 2010 the HMF portfolio was recorded in investor
statements at a total value of $89 million. However, Mr
McGlinn said yesterday that just before the release of last
week's $9 million the portfolio value was about $43 million -
more than 51% less than stated earlier.
"This is due to fund discrepancies and a general decline in
the share markets over the last two years," Mr McGlinn said.
While most investors held portfolio stakes in shares, the
total amount of cash owing some on investor statements, at
March 31, 2010, was $6.10 million, before adjustments, which
took the total to $12.60 million.
However, the amount of cash actually available in HMF's bank
account at March 31, 2010 was only $234,000 - a cash
shortfall of $12.35 million, the managers' said.
Grant Thornton's proposal for the High Court to consider
shortly is that unallocated shares held by HMF as at June
2010 be used to help make up the cash shortfall, or
potentially there will be no payment made to cash-component
Mr McGlinn said the managers had selected and sold shares
held by HMF to provide the cash for the first payout, saying
shares were sold at less than the current market price, and
the sales were timed so as not to depress prices.
"We have previously advised that we asked the court to decide
on the fairest way of calculating what each investor in HMF
should receive. The court hearing is scheduled for May 21 and
22," Mr McGlinn said.
Aorangi Securities owes investors about $97 million and by
September they had received 12c in the dollar, or about $11.5
million. Some had also received a wellbeing allowance;
determined by a third-party assessor.
In December, Grant Thornton said disputes and unresolved
issues over ownership of Aorangi Securities assets were
delaying realisation of investors' money.
The statutory managers were unable to make further capital
distributions to investors at the time and the position would
be reassessed in mid-2012.
Total realisations at December were about $34 million, but
were less than the previously estimated $40 million, because
of a dispute with a non-Hubbard shareholder in a farm
property. About $20 million is being held pending
determination of ownership of the proceeds.
HMF portfolio details
• At end of February, estimated value was $42.96 million.
• During March, about $6.5 million of investments sold, sales
past week to make up $9 million distribution.
• HMF share portfolio: Diligent, value up 51.56%, Ebos Group
up 12.93%, Ryman Healthcare, Metlife Care and Summerset, up
respectively 9.54%, 5.26% and 5.88%. Fisher & Paykel
Appliances up 15.71%, Mainfreight, down 8.97%, NZ Oil &
Gas up 5.71% , Smartpay down 5.56%, Olympus Pacific Minerals,
• Total statutory management costs, June 2010 to February
2012, $3.73 million.