Hanover Finance owners Mark Hotchin and Eric Watson yesterday confirmed they will contribute up to $96 million to support their stricken company.
Hanover and sister company United Finance ceased making repayments of principal and interest to 16,500 investors owed $554 million in late July, citing the collapse of the property development market and plummeting reinvestment rates.
After seven weeks of work on a restructuring proposal, which he pledged would include additional financial support from himself and Mr Watson, Mr Hotchin confirmed he and his business partner would contribute up to $56 million in cash and up to $40 million in property assets to strengthen their company's balance sheet.
On top of their existing equity of $64 million, that would take total shareholders' funds to $160 million.
Mr Hotchin said the injection of funds was part of a plan "which puts a priority on returning capital" and would return 100c in the dollar to debenture holders over five years, or sooner, market conditions allowing.
Mr Hotchin said he hoped Hanover's investors would take heart from the news.
"It's troubling times, as we all know, but this is a decision we made some weeks ago notwithstanding the fact that the market's continued to deteriorate, but we're committed to this so we'll see it through."
He said he, Mr Watson and Hanover's management were still finalising details of the restructuring plan with trustees and advisers and the completed proposal would likely be presented to investors within the next two to three weeks.
An investor vote would follow, probably in late October.
Mr Hotchin acknowledged the patience shown by Hanover's and United's investors over the past seven weeks.
"We're hoping to give them some comfort from this, and to send a message that we are standing behind the company and we're doing everything we can to get their money back."
Mr Hotchin and Mr Watson's capital injection should also please market commentators who estimated the pair would need to contribute anywhere from $40 million to $100 million to get their company back on its feet.
Mr Hotchin said it was hoped Hanover would survive and begin lending again in the future. "What we're hoping to do here, of course, is to have a business out the other side."
- The New Zealand Herald
