Why Hanover investors will get nothing from Hotchin and Watson

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.