For the ter­mi­nally stu­pid investors of Hanover Finance who last year voted in favour of a mora­to­rium on the promise that they would get 100 cents in the dol­lar back on their invest­ments here is a lit­tle les­son that will explain pre­cisely why the mora­to­rium was sought and why you are dumber than a sack of hammers.

The stage man­aged mora­to­rium play wasn’t for the ben­e­fit of the investors, it was purely for the ben­e­fit of Mark Hotchin and  Eric Wat­son so they could avoid pros­e­cu­tion. It seems that only Dun­can Bridg­man at the NBR has realised this;

Last Decem­ber, Hanover’s 13,800 investors voted to allow the com­pany to con­tinue oper­at­ing under a mora­to­rium promis­ing a drip-feed of their money over five years.
The deal meant Hanover would escape receiver­ship and investors lost their right to sue the direc­tors per­son­ally for any short­fall from sale of prop­er­ties.
Secured investors were owed $462.5 mil­lion; while its main sub­sidiary United Finance has 2575 secured depos­i­tors owed $64.7 mil­lion.
Spar­ing the gory details (the num­bers are not yet avail­able) Hanover said yes­ter­day that a “rapid dete­ri­o­ra­tion” in the com­mer­cial prop­erty mar­ket and IFRS require­ments had impacted heav­ily on the company’s result for the year to June 2009.

What! I hear you say. Well there is a two year time period on seek­ing to “get” Direc­tors and recover inap­pro­pri­ately allo­cated Direc­tors Fees and that time period is now passed thanks mainly to the mora­to­rium. If the com­pany had been put into receiver­ship a year ago on the advice of many but mainly Bruce Shep­pard then Hotchin and Wat­son may well have been pur­sued by the receivers to recover monies.

That will not hap­pen now and Wat­son and Hotchin will most likely stitch up a cosy deal that makes sure they get paid for their share­hold­ing in cash from Allied Farm­ers and that the investors roll the dice and take shares in the new com­pany in the hope that they can sell and recoup their money. Any fool, though per­haps not the Hanover investors can see that there will be many more sell­ers than buy­ers and the like­li­hood of get­ting even 20c in the dol­lar remains remote. Even more likely is that Wat­son and Hotchin with their great wads of cash will buy up those impov­er­ished investors share­hold­ings and be back in con­trol within 24 hours of bail­ing out.

And to be per­fectly hon­est I have lit­tle sym­pa­thy for the investors, they had the oppor­tu­nity to realise as least some­thing but they choked and voted for the mora­to­rium. They now suf­fer their loss at their own hands rather than at the hands of Eric Wat­son and Mark Hotchin.

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