Published 27 August 2010
The statutory managers of Timaru financier Allan Hubbard, his wife & related entities confirmed a shortfall in Hubbard Management Funds today and warned that investors in Aorangi Securities Ltd might suffer a loss.
Statutory managers Trevor Thornton & Richard Simpson (Grant Thornton) issued a progress report today and said they’d issue their next report at the end of September.
The Government placed Mr Hubbard & his wife Margaret personally into statutory management in June, along with Aorangi Securities & 7 trusts, and added another entity, Hubbard Management Funds, to the list in July. Mr Hubbard’s best-known business, South Canterbury Finance Ltd, isn’t in statutory management.
Commerce Minister Simon Power said Mr & Mrs Hubbard were so closely involved in the affairs of Aorangi Securities & the trusts that the statutory managers couldn’t operate unless the couple were personally included in the order. The charitable trusts are Benmore, Morgan, Otipua, Oxford, Regent, Te Tua & Wai-iti Charitable Trusts.
The statutory managers said today the 300 investors in Hubbard Management Funds had been told the reported value of their investments at 31 March 2010 was overstated by at least 25% and that Aorangi investors might suffer a loss.
Mr Simpson said: “As statutory managers, we are aware that this news will be a shock & a disappointment to the many people who have invested in these businesses operated by Mr Hubbard.
“We are mindful that some people depended on a flow of funds from Hubbard Management Funds & Aorangi for their day-to-day living and that the freezing of the funds under statutory management has created hardship for them. For those people, an emergency fund has been established.
“In the case of Aorangi, an underlying problem we are dealing with is that Mr Hubbard has allowed Aorangi to accept deposits of about $96 million from investors on call, but he invested those funds in investments or loans which are nearly all long-term in nature.
“Much of the money is invested in minority interests in about 25 farms, as well as in a charitable trust administered by Mr Hubbard and a number of other commercial entities, some of which are of poor quality. These investments do not generate sufficient income to pay the interest due to Aorangi’s investors.
“Many of the farming businesses invested in are highly geared, the dairy farm sales cycle is currently at a low and, in the case of the charitable trust, many of the loans are interest-free and some will not be recoverable.
“While we hope to be able to make a small repayment to the Aorangi investors in October, Aorangi has only a small amount of available cash and it will take a long time before the investments can be realised."
On Hubbard Management Funds, Mr Simpson said: “Hubbard Management Funds has deposits of about $82 million and is invested in public company shares, venture capital funds & unlisted companies. The total value of Hubbard Management Funds is at least 25% less than reported by Mr Hubbard to investors in the 31 March statements this year. The reason for this is that some of those statements included investments & cash balances which did not exist. There are also likely to have been further losses in value in the fund since 31 March due to the weakness in the markets over that period.
“The investment profile is not consistent with what would be appropriate for a typical investor in Hubbard Management Funds. There is a lack of blue-chip investments and the composition of the fund’s portfolio generally means the fund is high-risk in nature.
“We have many issues to still work through and we will have a further progress report to the investors at the end of September.”
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