Slowly Sinking Tabloid Muffs Apology
Slowly Sinking Tabloid gave Mark Hotchin and Eric Watson space in their tabloid rag for this today.
Hotchin describes in detail the Kawerau Falls transaction that he was alleged to have made $20 million on personally in a "quick flick".
While SST are framing it as a "right of reply" it really stinks of "the lawyers letters are flying for the sensationalist b.s that we've been running the past month so we have to do this to mitigate defamation". Hotchin in the piece has things to say about the reporting that papers will not be publishing unless under legal duress. Because Fairfax especially, being a multi-national large corporate will never admit they are wrong.
All was going well until SST couldn't help themselves and had to have the last word.
The Sunday Star-Times offered Mark Hotchin this right of reply. While the profit may not have passed directly to Mr Hotchin and Mr Watson it nevertheless went into the group owned by their interests.
High-ho-high-ho, it's off up Shortland Street we go. SST again failing to understand that the profits went back to the very company that is paying not just Hotchin and Watson but all those Hanover "investors". Hotchin had already explained this in detail where he specifically addressed the point:
"Actually, the profit was paid to Hanover Finance and United Finance for the benefit of those companies. They got the cash; the investors in those companies enjoyed the benefit of that cash in order to redeem deposits and meet all the other obligations of the companies".
But the clincher that the SST knows that it is at fault - the online story that Hotchin is referring to by Greg Ninness has now magically disappeared.
You can say Hotchin and Watson bully the media all you like, but fact remains is that the publisher of the SST cannot be bullied because they are a ginormous organisation with huge financial backing. Hotchin and Watson here are the little guys where garbage is being published about them stirring up public sentiment of hatred to sell newspapers.
I can feel the return of the Asian Invasion Hotchin Sensationalist reporting scorecard which stood last update at
HoS -3, NBR -2, Fairfax (Stuff) 0, Herald 2
After today's effort of fucking up a legally driven apology by SST we may have to adjust it down to
Fairfax (Stuff) -5, HoS -3, NBR -2, Herald 2
Hotchin describes in detail the Kawerau Falls transaction that he was alleged to have made $20 million on personally in a "quick flick".
While SST are framing it as a "right of reply" it really stinks of "the lawyers letters are flying for the sensationalist b.s that we've been running the past month so we have to do this to mitigate defamation". Hotchin in the piece has things to say about the reporting that papers will not be publishing unless under legal duress. Because Fairfax especially, being a multi-national large corporate will never admit they are wrong.
All was going well until SST couldn't help themselves and had to have the last word.
The Sunday Star-Times offered Mark Hotchin this right of reply. While the profit may not have passed directly to Mr Hotchin and Mr Watson it nevertheless went into the group owned by their interests.
High-ho-high-ho, it's off up Shortland Street we go. SST again failing to understand that the profits went back to the very company that is paying not just Hotchin and Watson but all those Hanover "investors". Hotchin had already explained this in detail where he specifically addressed the point:
"Actually, the profit was paid to Hanover Finance and United Finance for the benefit of those companies. They got the cash; the investors in those companies enjoyed the benefit of that cash in order to redeem deposits and meet all the other obligations of the companies".
But the clincher that the SST knows that it is at fault - the online story that Hotchin is referring to by Greg Ninness has now magically disappeared.
You can say Hotchin and Watson bully the media all you like, but fact remains is that the publisher of the SST cannot be bullied because they are a ginormous organisation with huge financial backing. Hotchin and Watson here are the little guys where garbage is being published about them stirring up public sentiment of hatred to sell newspapers.
I can feel the return of the Asian Invasion Hotchin Sensationalist reporting scorecard which stood last update at
HoS -3, NBR -2, Fairfax (Stuff) 0, Herald 2
After today's effort of fucking up a legally driven apology by SST we may have to adjust it down to
Fairfax (Stuff) -5, HoS -3, NBR -2, Herald 2
posted by Cactus Kate at 7:57 PM
14 Comments:
So, it appears:
- Hanover Equity Partners buy Kawerau Falls land for $50m.
- HEP sells KF for $65m+GST, less $2.5m costs. Gain to HEP = 65m-50m-2.5m = $12.5m.
- Melview bought KF with $80m loan from Hanover Finance & United Finance.
Meaning HF&UF lend the (theoretical) cash to Melview to buy KF land, so it appears the money comes back to Hanover. But to which Hanover company?
The cash comes back to HEP, which quietly books the profit (and pays it to shareholders, including Hotchin & Watson?), while all the risk of the outstanding KF loan is left with HF&UF and it's gullible investors.
If Melview fails, it is HF&UF investors who lose, not the shareholders of HEP.
Nothing Hotchin said contradicted any of the above. Though Hotchin bizarrely implies the KF land sale profit was booked to HF&UF!
"Actually, the profit was paid to Hanover Finance and United Finance for the benefit of those companies. They got the cash; [Mark Hotchin]"
HY&UF should have made a profit on the financing of the KF loan, but that is not the profit Hotchin was referring to - he was explaining what happened to the $12.5m land sale profit.
So the best Hotchin has managed is to quibble over the level of the profit made by HEP, and muddy the waters as to who the KF land sale cash actually got paid to.
If Hotchin IS correct and HF&UF lent $80m to Melview to buy the KF land off HEP, but Melview then paid $65m+GST to HF&UF for the KF land, then:
- Melview now own the KF land
- Melview still owe $6.875m to HF&UF
- HEP lost $50m on the KF land they just gave to Melview for nothing in return
Leaving Melview with nearly free land, and HEP shareholders asking for the SFO...
Hmmm, no wonder capitalists are so beloved by the masses ;) A lot more questions arise from Hotchin's riposte than are answered.
Mad Marxist.
You've hit the nail on the head in terms of the fucked reporting by financial "journalists" across New Zealand. So the SST got caught out making things up; have taken down the post by Greg Ninness; and battling down for the legal proceedings.
About time someone counters the shit we read from business "journalists" in the SST, Herald and that irrelevant rag the NBR.
'"Actually, the profit was paid to Hanover Finance and United Finance for the benefit of those companies. They got the cash; the investors in those companies enjoyed the benefit of that cash in order to redeem deposits and meet all the other obligations of the companies".
like paying dividends to Eric AND Mark...!!Funny as a play...chicanery .So these 2 astute individuals managed to destroy nearly 1/2 billion of investors money but they are blameless on the basis of hiding behind the company structure.Profits for the boys by way of dividends ,losses for investors by way of this company that could survive ANY conditions.Complete confidence game.
MM bit busy today but shall simplify Hotchys response from the details when I have the chance as I don't agree with your analysis.
Anon, half a billion of value? Hmm....don't think so. Given of course Hanover depositors/investors voted to take shares in Allied.
Www.Hanover.co.NZ makes interesting reading presently and I suspect more information will be posted on this site.
Remember the claim is Hotchin is hiding and not answering questions, which is false. Just because you don't agree with or like the answers doesn't make it wrong,
'Anon, half a billion of value? Hmm....don't think so. Given of course Hanover depositors/investors voted to take shares in Allied'
and how much are those shares worth,last under 1c heading to zero.No wonder Hotchin was turning cartwheels after scaring he 'investors' into the ALF 'DEAL'!Hotchin is an appropriate symbl of greed.Should be jailed.
Mad Marxist, not sure if you've got this one right - the SST article implied that Hotchin and Watson made a "quick flick" leaving HEP with $20m cash profit and the investors with nothing.It would appear that HEP did not make any profit but simply covered costs and HFL and UFL were the benefactor of any profit. Sounds good for the investors so far!
Melview had to settle the purchase of $65m and fund the development costs of the project - they appear to have borrowed the money from the Bank of Scotland and HFL & UFL. One would assume that HFL & UFL would have assessed the credit risk of such a transaction at the time, their auditors would have intensely reviewed this exposure with no adverse comment - sounds ok for the investors so far!
The Kawerau Falls development is significant and no doubt would have delivered a big profit to the developer and an appropriate or even exceptional return to the financiers had all things gone to plan. As we know that was not the case, not sure we can blame Watson and Hotchin for that?
The way I look at it is that the SST used the profile of Hotchin, Watson and Hanover, added some dramatic and inacurate reporting in an attempt to sell their papers - its time they reported factual,balanced and well researched material, good on Hotchin for puting the record straight.
There was no cash left for investors after Hotchin and Watson stripped dividends out of Hanover.
You can muddy the waters all you want by trying to unravel complex transactions, but the bottom line is that H&W raped the company at the expense of investors.
@ Anon 10:50am Apr 5 - you need to justify your claims that everything "Sounds good for the investors so far!" with some actual accounting.
The point I was making is that - according to what Hotchin claimed - there is a discrepancy in the cashflows. Hanover Equity Partners own some land, but Hotchin said the profit gets paid to separate finance firms Hanover Finance & United Finance. This breaches the most fundamental rules of accounting (separation of entities), and Hotchin needs to explain the money trail better if he wants anyone to believe him.
At the moment - strictly from what Mark Hotchin claimed in the SST - Hotchin and Watson appear to have virtually gifted land to Melview OR propped up the sale of their land (possibly for an unrealistically inflated price) by outsourcing the financing risk to another firm's investors.
I note Hotchin could prove SST wrong on the sale price figures if he released the relevant sale documents (he is under no obligation to do so, but it would prove his point convincingly).
I look forward to Kate's alternative explanation as to routing of the Kawera Falls cash and motivation for such.
Yours in plunder,
Mad Marxist.
MM - the clearest statement is this one....referring to the profit at the top of the sale cycle - selling to Melview.
"There was a $12.5m profit, which went to Hanover Finance and United Finance. Eric Watson and I did not make any direct profit on any of it".
That is, as holders of deposits themselves in Hanover and United they indirectly shared in the profits with other depositors but didn't pocket the cash.
Melview failed hence the loan wasn't paid back, nor that to Bank of Scotland. Hanover had nothing to do with the developer failure.
I am looking for details of HEP to see where the sale was booked and if that has been made public anywhere. Hotchin says "The staff of Hanover Equity Partners negotiated a purchase of a property for $50m from vendors of land at Queenstown". It talks about the "negotiation" and doesn't actually say who the legal owner of the title was because the rest of the piece refers to Hanover and United.
You recall in the Allied/Gapes case where the loan held up in court, various Hanover entities (Hanover Finance and Hanover Property) were used and the court declined Gapes' invitation to rule it a sham. Without access of course to all the structure diagrams it is bloody hard to tell I agree.
'although Hanover Finance and United Finance lent money (on normal arm's length terms, and subject to usual lending criteria) to help Melview fund the transaction, Melview repaid those loans and refinanced them. Hanover and United made new decisions to proceed with that refinancing. '
so a loan was made,repaid and then refinanced...sounding like the winebox Magnum merry go round.Identifying the vendor/s of this land would be interesting.Smells like multiple vendors,contemperaneous settlement and all the obsfucation one would expect from practised charlatans.
Anon
Have a look at any major development in Auckland or Queenstown and very few situations involved going into your friendly bank manager at BNZ and having the bank finance everything. Related party lending, vendor financing and mezzanine financing has built many of the tall buildings you see today. When it goes pear shaped it goes pear shaped very quickly, hence the concept of risk and return,
Fair point Kate. So if Hanover Equity Partners simply acted as agents for Hanover Finance & United Finance, then it appears the Kawerau Falls land sale is a straight vendor financing by HF&UF.
(The Gapes case appears quite different - Gapes claimed he had an off the books joint venture with Hanover, but couldn't show proof of that. No-one has claimed this about Melview as yet.)
So events appear to be:
- HF&UF buy KF land for $50m (with HEP acting as agents negotiating the purchase)
- HF&UF lend $80m to Melview, who repay $73.125m (= $65m+GST) to HF&UF as purchase price of KF land
- HF&UF pass GST onto govt, pay $2.5m in their own costs, and book a $12.5m profit
- Melview have oustanding loan of $6.875m (presumably used for initial development costs)
- HF&UF pay out dividends based on the paper $12.5m profit on KF sale
But that still leaves a few questions for Mssr Hotchin the director:
- what due diligence was done on Melview by HF&UF, given you are effectively letting them play (and hopefully profit) with your land in exchange for nothing but an IOU from Melview?
- why did you pay out dividends (from which you apparently benefited) prior to actually getting any cash from Melview?
- how could you allow HF&UF to trade as solvent, if you were making dividend payments well in advance of actual cash coming into your hands from Melview?
Naturally, the auditors in all this come out smelling like a sewage pond. How could they not ask any questions like above? I know, lots of others do this, so its okay, right? ;(
Heightened reward for greater risk is fine, but staff & directors are still expected to act with competence and due care for investors funds...that is where Hotchin appears to be struggling.
Mad Marxist.
Dividends question is answered in this article where Fran O'Sullivan has published Hotchin's explanation. I will post on it when I have time later in the weekend.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10717331
There seems to be general confusion with respect to the solvency test. Hotchin and his lawyers state s4 of the Companies Act is the test of solvency and not that it is declared out of retained earnings. Detractors argue this. It will no doubt come up in any legal action.
With regards Melview, remember it owed a fortune to Bank of Scotland. Have a look at the car crash of other lenders in this before blaming solely Hanover for lending McKenna the dosh.
http://www.propbd.co.nz/afa.asp?idWebPage=8338&idBobDeyProperty_Articles=13197&SID=244536294
In fact many corporates loaned McKenna money. Have a look at his roll call
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10575385
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