Disbelief was the first reaction to the news that Allan Hubbard was being investigated by the Serious Fraud Office and that he and his wife Jean were under statutory management.
This wasn’t a flash Harry, living the high life. This was a man who learned the lessons of his Depression-era childhood; who is spite of his wealth, lived a very modest life; the man who’d done so much for individuals, business, charity and the community,
When banks wouldn’t back would-be farmers, Hubbard often would. He looked at the business case, but he also looked at the people and their personal drawings. Those who were prepared to work hard and spend little on themselves, almost always got his support.
Assistance was often given as a personal loan with low or no interest and he was rarely, if ever, let down.
He took a personal interest in his clients and adjusted his fees to their circumstances. It wasn’t unusual for someone having a bad year to find their accountant’s bill was a lot less than expected.
His investment vehicles, Hubbard Management Funds and Aorangi Securities, have always given investors very good returns.
But the second report from Grant Thornton, the statutory managers, has very bad news for investors, many of whom rely on the interest payments.
. . . it is highly unlikely that we will be in a position to return any significant amounts of capital to investors this side of Christmas.
On a slightly brighter note, it is our priority to try and be in a position to make a small repayment to investors in October. There is an alarming gap between the income that Aorangi is presently receiving from its loans and investments and the amount it needs to pay out to its investors. Any payment at this time will be treated as a repayment of capital and will be dependent on the amount of funds paid to Aorangi by borrowers and from the investments in farms. Interest payments remain suspended.
Grant Thornton says a large part of the problem is that Aorangi accepted deposits from investors on call and put them into long term investments or loans including minority shares and mortgages in about 25 dairy farms.
The dairy payout is holding up but farm sales are slow. Those who received loans are unlikely to be in a position to repay them quickly and forcing sales would be disastrous.
The protracted sale process for the Crafar farms shows the difficulties of putting several farms on the market at once. Forcing more sales would depress prices and threaten equity in the properties concerned which would impact on the value of all farmland.
The ripples from the statutory management and SFO investigation have spread through the southern South Island and further, showing just how big an influence Hubbard and his various operations have.
When other finance companies have failed it’s not been hard to find people ready to criticise the principals. There has been no public condemnation of Hubbard, and I haven’t heard any privately. People still trust him and the feeling of disbelief continues.