Investment arrears and shortfalls of more than $20 million in companies associated with South Canterbury Finance founder Allan Hubbard have been highlighted by the Government-appointed statutory managers.
Aorangi Securities Ltd, Hubbard Management Funds and the Te Tua Charitable Trust come under close scrutiny from the statutory managers, who have again criticised Mr Hubbard's accounting practices and for the first time raised the prospect of court action to determine the status of funds.
Loyal supporters of Mr and Mrs Hubbard have been critical of the managers' reports to date, but earlier this month welcomed the separate decision by the Serious Fraud Office to investigate South Canterbury Finance transactions, as a way of clearing Mr Hubbard of blame.
In the fourth report of Grant Thornton, since statutory management was imposed on Mr Hubbard, his wife and 13 entities since June 20, the managers said investors in the Hubbard Management Funds may eventually only receive 60% of their money back.
The fund was documented to have a total value of $82 million, but there is a total $19 million shortfall in some areas, while the positive of the investigation was finding an excess of shares valued at $8 million, the statutory managers said.
"However, our review of the assets owned by Hubbard Management Fund and allocated to investors confirmed a shortfall of some $13 million of investments and almost $6 million of cash when compared with a summary of all investors statements," the managers said yesterday.
The managers reiterated earlier concerns, saying the quality of the reporting by Mr Hubbard in the statements issued to investors was "of serious concern to us" and described the state of the Te Tua Charitable Trust loan records as "very poor".
Because of the state of the existing records, in Aorangi Securities' case, the managers have had to reconstruct much of the documentation to a standard which allowed them to manage the loans and investments.
"The statutory managers, with the support of Mr Hubbard, are actively trying to rectify loans that are not meeting their obligations while also hoping to realise $20 million by the middle of 2011," they said.
Investors with frozen funds may have a long wait for some return on capital.
The statutory managers said they were "very likely" to have to seek a court ruling on whether the Hubbard Management Fund is "considered a pool or made up of individual investor portfolios".
"If we require a court ruling, it could take many months before we receive that decision. In the meantime, we will be actively managing Hubbard Management Fund to protect and enhance investors' interests," they said.
The managers said that of Aorangi Securities' $24 million investment in Te Tua trust, a "worst case" estimate was that only $6.88 million might be recoverable.
There were several equity interests of Mr Hubbard's, transferred by him to charitable trusts in March this year, which the managers described as being of "doubtful validity", and a formal process of annulment had begun.
The report also shows that Aorangi's borrowers and investments were paid only a quarter of the $3.25 million expected to be paid by September 30.
"This shortfall has been a trend for some time. The cash received to date is less than half what would be required to meet Aorangi's interest obligations to investors on the pre statutory management interest payment regime," the managers said.
Total loan and investment arrears for Aorangi are now estimated at $3 million and while $59 million is invested in various farms, the borrowers are paying banks and suppliers, rather than Aorangi Securities.
"We are not optimistic about the likelihood of Aorangi Securities receiving much cash from its farming investments for some time," the managers said.
They cautioned that while Mr Hubbard had been able to use his own assets and cash to make up the shortfall in the income of Aorangi, "there is now uncertainty whether investors can rely on Mr Hubbard's support in the future, given his changing financial position".
Grant Thornton will shortly put a Q&A section on its website for investors and is working with a liaison group of six investors who will later hold meetings with other investors
UNDER STATUTORY MANAGEMENT
• Aorangi Securities Ltd
• Hubbard Management Funds
• Hubbard Churcher Trust Management Ltd
• Forresters Nominee Company Ltd
• Allan and Jean Hubbard
• Te Tua Charitable
• Trust Oxford Charitable
• Trust Otipua Charitable Trust
• Regent Charitable Trust
• Morgan Charitable Trust
• Benmore Charitable Trust
• Wai-Iti Charitable Trust
• The Temple Bar Family Trust
• Barns Charitable Trust
Earlier this month South Canterbury Finance, which was placed in receivership on August 31 owing $1.7 billion, became the focus of a separate Serious Fraud Office investigation over "related party transactions" worth tens of millions of dollars.
