Published 4 July 2011
The statutory managers of Hubbard company Aorangi Securities Ltd said on Friday uncertainty around ownership of $60 million of assets made the timing of returns to investors unclear.
In their seventh report to investors in Aorangi and Hubbard Management Funds, statutory managers Richard Simpson, Trevor Thornton & Carson McGlinn (Grant Thornton Ltd) said they’d made good progress in realising assets and continued to finalise issues and stabilise the complex farming interests associated with Mr & Mrs Hubbard. They said they’d restructured & significantly improved the financial reporting & governance of a number of associated farming interests. However, in the short term, the complexity of third-party loans & investments recorded by Aorangi Securities to businesses related to Mr Hubbard meant the schedule & amount to be paid to investors was unclear. The statutory managers expect to distribute 8c:$1 to Aorangi investors this month, but said this depended on the repayment of a refinancing loan. Hubbard Management Funds held its value over the last quarter, while progress was made moving investments into more blue-chip entities.
The Serious Fraud Office laid 50 charges under the Crimes Act against Mr Hubbard on 20 June over the affairs of Aorangi, Hubbard Management Funds and Mr Hubbard & his wife Jean. The statutory managers said in their Aorangi report that, after engagement with various interested & affected stakeholders, key decisions had resulted in some stabilisation: “These restructures enable the farming interests to be packaged in a marketable form to maximise realisable value. We have sold interests in a number of farms at or exceeding valuation, for a total consideration in excess of $14 million. “We would expect additional realisations in the next 3 months to exceed $20 million. Presuming the beneficial ownership of the interests can be determined, some or all of those realisations should be available for distribution to Aorangi investors.” The distribution of 8c:$1 is less than expected and reflected the difficulty the statutory managers continued to have in collecting loans and sorting out ownership issues relating to various farms: “Investors will have a long wait for repayment on investments because assets purported to have been transferred to Aorangi may still be owned by Mr & Mrs Hubbard.” The statutory managers are challenging an arrangement that Mr Hubbard purported to implement with South Canterbury Finance Ltd, which broadly involved Mr Hubbard introducing assets indirectly for the benefit of South Canterbury Finance in return for $110 million of bad debts in South Canterbury Finance. The return from these bad-debt loans since the statutory management started in June 2010 was about $500,000. “The security given to South Canterbury Finance was over the Hubbards’ ownership interests in 21 farms. It has been agreed with South Canterbury Finance that the courts be asked to provide directions as to who is the beneficial owner of these assets. “A further complication on the ownership is the position of the other owners of the 21 farms, who were not aware of the action taken by Mr & Mrs Hubbard in unilaterally transferring their interests for the benefit of South Canterbury Finance. This was done without reference to the other parties, even though (in many instances) there are agreed arrangements in place, that is partnership agreements & company constitutions, that require shareholder approval before shares are transferred.” The Hubbard Management Funds value stood at $49.3 million at 31 May, after adjustments for assets subject to third-party claims. The statutory managers said some investors had asked if they’d produce individual investor statements as Mr Hubbard had done: “As noted in previous reports, it appears the statements issued to investors have contained errors with, potentially, a $31 million shortfall of assets when compared with all investor statements as at 31 March 2010. “We will not be in a position to advise each investor of their tax position regarding the fund until we have directions from the court as to the portion of Hubbard Management Funds’ assets each investor is entitled to. “Despite the significant issues we have found, and the quality of the records, we still expect to file the papers with the court by the end of September. The court will then schedule a hearing, which is unlikely to be before 2012.” The cost of the total administration to the end of May 2011 for Aorangi, Te Tua Trust & Hubbard Management Funds was $4.9 million (gst inclusive), made up of $2.87 million (Grant Thornton), $1.15 million (legal), $276,303 (other disbursements) & $609,477 (gst). The statutory managers will file next report at the end of September.
21 June 2011: SFO lays 50 fraud charges against Hubbard
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Attribution: Statutory managers’ release, story written by Bob Dey for the Bob Dey Property Report.