Hanover finance

Did any one get hit with this latest big investment company to get into trouble? It's one I thought would be as safe as houses.

No - not us . We are really careful re. investments after twice being stung by such happenings. I think if we did though have any money in finance companies I would cut my losses , withdraw the money and put it in the bank . Feel for people heaps who are affected as they have often gone for a bit higher interest rate to secure a better retirement etc. for themselves and their families.

The one bonus of being horribly in debt and not having a penny to ones name is that all this business with finance companies leaves us unaffected!

chooky;185749 wrote: No - not us . We are really careful re. investments after twice being stung by such happenings. I think if we did though have any money in finance companies I would cut my losses , withdraw the money and put it in the bank . Feel for people heaps who are affected as they have often gone for a bit higher interest rate to secure a better retirement etc. for themselves and their families.

Yep that is how I feel about it as well. (Fortunately) we are in debt and our only savings is a small superannuation plan. We cashed the bulk of ours in years ago to fund the deposit to buy our forestry block in NZ.

We are related to some expats who are now doubling their overseas posting time to recoup what their super' fund has lost.

My Auntie in West. Aust. who worked for Woollies for years and years has also lost a lot of her super by the administrators.... there you go, a very "normal" person being affected by the decisions of these fund managers who drive around in far better vehicles and being paid more money than she would ever see in her super fund, losing a hugh whack of it for her...

God, you'd feel sick, wouldn't you? We did have a small super plan with ING, but when they started freezing things we pulled it out and put it on the mortgage.

The Kats Place;185748 wrote: Did any one get hit with this latest big investment company to get into trouble? It's one I thought would be as safe as houses.

Yes, by looking at the recent ads on TV with Richard Long saying that "Hanover are equipped to withstand any market conditions", you would have gained the impression that they were safe as houses.

However, I have witnessed the modus operandi of Eric Watson over many years. In many cases, he has made his wealth at the expense of other shareholders. In the case of Hanover, Eric Watson and Mark Hotchin (the joint owners) have withdrawn $86.5M in dividends over the past 2 years. On TV last night, the comment was made that if this money had been left in Hanover, rather than being withdrawn by the directors, it may well have been possible for Hanover to continue trading.

Again, on TV last night, it was stated that depositors are probably only likely to receive back 50% of their money or less. Yet again, Eric wins, and the little guys lose.

Personally, I would not have a bar of any company in which Eric Watson is involved.

Recently, Inger and I invested a considerable sum of money in a 5-year secured debenture. Hanover were offering very attractive interest rates, but I was not prepared to touch them, given that Eric is involved. Several of the other finance companies which were offering very attractive interest rates at the time, have also gone bust in recent weeks.

In making our decision, we looked at where the funds were being loaned to. Anything to do with Property Development, Residential Property or Consumer Finance was ruled out because of the likelihood of default on the part of the borrowers.

We invested our money with PGG Wrightson Finance, who have been around in various incarnations since the mid-1800s. As most people know, PGG Wrightson loans exclusively to the rural sector, which is one of the few sectors of the economy that is in good shape right now [^]

Even though the security is excellent (nearly all loans have first mortgages over the respective farms), and the rate is attractive (9% with monthly interest) we would not invest more than 10-15% of our portfolio with any single company.

The rest is spread between various blue-chip shares, Kiwibank and the ASB.

Feel really sorry for anyone who was affected. We haven't got any money to invest!!

What I cannot understand is why people who have no money to invest take out loans to invest in these companies. There was one elderly couple on the news in the last week or so (not with Hanover) who borrowed $100,000 against their house to invest and of course the company has gone belly up. How silly can you get ?? It showed the husband who was about 70 looking for a job as he now has a mortage with no income...

ccrk9;185774 wrote: What I cannot understand is why people who have no money to invest take out loans to invest in these companies. There was one elderly couple on the news in the last week or so (not with Hanover) who borrowed $100,000 against their house to invest and of course the company has gone belly up. How silly can you get ?? It showed the husband who was about 70 looking for a job as he now has a mortage with no income...

Its all about how people are convinced by the broker/advisor etc selling the product to begin with.... and I find with elderly folk they see things changing and "think" they are keeping up with the times and are convinced by others indeed they are...

same as the elderly who borrow against their own houses for their loser adult children who cannot raise equity for their money losing projects and businesses.
I really would like to see a law brought in to protect Seniors from their own families and the stress and pressure they are put under to "borrow" to finance others " pipe dreams".....[}][}][}]

sorry personal vent!

Wow! That's a heap of money to lose....

My Dad has played the sharemarket for years. He always maintains you shouldn't invest what you can't afford to lose. Sounds like good advice for anything these days!

Grant, I thought PGG were in trouble too?

ccrk9;185774 wrote: What I cannot understand is why people who have no money to invest take out loans to invest in these companies. There was one elderly couple on the news in the last week or so (not with Hanover) who borrowed $100,000 against their house to invest and of course the company has gone belly up. How silly can you get ??

Yes, some people just have no idea and others get conned by various salespeople. The elderly couple would have looked at the relative interest rates:

- Take out a mortgage and pay 9% or so (or maybe much less if it was a few years ago)

- Invest in Hanover et al and receive 10-11%

Easy money they would have thought, without taking account of the risk []

How many of us have heard the following line:

- Unlock some of the equity in your house to buy an investment property

People who invested in BlueChip and other similar schemes fell for this one. If they managed to sell their investment property last year, they probably would have done OK, but if they are still holding onto it, there is a good chance that the mortage exceeds what it is currently worth. Meanwhile, they are busy claiming "tax losses" against their other income which on the face of it recoups 33% or 39% of their loss, while having to stump up the other 61% or 67% out of their income from their primary job. The equation probably doesn't look too bad until their fixed-rate mortgage term expires in the next year or so. Then you will find a lot of these heavily-leveraged investment properties will be dumped on the market in a fire sale, which will depress things even further...

Rant over.

oskatd;185782 wrote: Grant, I thought PGG were in trouble too?

This is an excerpt from PGG Wrightson's most recent "Continuous Disclosure" statement to the Stock Exchange:

Reinvestment Rate

We are pleased to confirm that our reinvestment rate remains strong at this
time. We have a 78% reinvestment rate based on the number of maturities, and
a 70% reinvestment rate based on the dollar value of maturities.

You will be aware that reinvestment rates can be highly variable over short
periods of time. Monthly rates taken on their own may not present an
accurate picture. Accordingly, we wish to provide by way of additional
information our monthly reinvestment rates by dollar value for the last six
months:

Month
Reinvestment rate
(dollar value)

October 2007
79%
November 2007
74%
December 2007
89%
January 2008
78%
February 2008
73%
March 2008
86%

Debt Being Serviced

We continue to benefit from a highly diversified funding base including
listed bonds, bank wholesale lines and retail deposits, currently totalling
approximately $433 million.

Forecast Income

We are continuing our trend of sound profitability. Our forecast income for
April 2008 is $4.736 million.

Concentration of Loan Book

We have always prided ourselves on the integrity of our loan book, and we
continue to devote our energy to maximising our investors' returns through
high quality lending.
We continue to lend exclusively to the rural sector. Further, 77% of our
loan book is currently secured by first mortgages over land.

As part of our ongoing commitment to investors, we monitor loan book
concentrations closely, and carefully scrutinise connections between
borrowers. We confirm that our top 5 borrowers comprise 12.9% of our loan
book. All loans to these borrowers are secured by first mortgages over farm
properties. There are no significant connections between these borrowers.

There has been a more recent statement mentioning an 80% re-investment rate, but I would have to hunt further for it.

The Key Issues in that statement to my mind are:

- Re-investment Rate
- Concentration of Loan Book

You see, with the Hanover situation, some of their largest loans were made to interests related to the directors, Eric Watson and Mark Hotchin. Apparently, some of these have been repaid, but it is never a good look because it makes a mockery of such principles as "Arms Length" transactions and raises the issue as to whether these loans were really made on "Commercial Terms" or rather as a "Mates Rates" type arrangement.

Here is the later statement I had seen from PGG Wrightson:

12:30PM Monday July 07, 2008

PGG Wrightson Finance today distanced itself from the rest of the finance company sector by saying it has a reinvestment rate of 80 per cent.

The statement comes as finance companies generally struggle to attract new retail funding and get people to keep money with them when term deposits mature in the wake of collapses in the sector.

PGG Wrightson, which describes itself as a "specialist in rural lending" said it has lifted term deposits by a net 25 per cent in the 12 months ended June 30. Total retail funding grew more than $30 million.

"We have investor support because of our clear differentiation. Investing in secured lending for farming purposes is a strong proposition, with the rural economy generally well-positioned for future performance," Michael Thomas, PGG Wrightson Group general manager financial services, said.
"

So, it all looks pretty good from where I'm sitting. As with anything, it's a calculated risk, but Finance Companies in the current market don't come much safer than PGG Wrightson with their rural focus.

Anyone wanting the ultimate in security should however look at Rabobank with their AAA credit rating from Standard & Poors. Bank Security doesn't get any better than that, and once again, Rabobank focus on the rural sector in NZ. That tells you something doesn't it [^]

Well yes, I have to admit we are part of the Hanover fiasco. We had not heard any bad stuff but after the Queenstown development thing began talking about pulling it out but decided to wait till they were due. Bad mistake!! And we have been with this company for over 10 years when they were Elders so the trust had built from there not from any ads etc. And since we were stung by the BNZ trouble years ago are suspicious even of banks,we now wonder what one is supposed to do with all this money that we are told to save for our retirement. Under the mattress seems a good option at present though I heard one person say this morning that when he gets money out of his investments he plans to spend it. I may have grouched long and often that OH is still working when he could be retired but now I have to be thankful there is still an income.

GrantK;185763 wrote:
we would not invest more than 10-15% of our portfolio with any single company.

The rest is spread between various blue-chip shares, Kiwibank and the ASB.

Learn't at my mothers knee -1) don't put all your eggs in one basket 2) if something looks too much like a good deal - there is probably something 'whiffy' about it.

I was surprised Grant that bank deposits aren't guaranteed in NZ (unlike UK). My UK funds are spread over several banks making sure that it is all covered by the bank limit. As I (and lots of others) found out even a firm like Equitable Insurance - great name - trading since 1700's etc can go bloooie.