Sheppard labels Hanover investors 'stupid lunatics'

01:43, Jan 31 2009

Hanover Finance investors who approved the company's moratorium would get back just 55 per cent of the net present value of their investment by giving up on $200 million in interest payments, according to Shareholders Association chairman Bruce Sheppard.

By deciding against receivership, Hanover investors had also forgone an opportunity to chase some $86 million in dividend payments Hanover paid its owners ahead of the company's collapse, he said.

The association has washed its hands of "dumb wit" finance company investors after efforts to lead them through complicated restructuring proposals were thrown back in Mr Sheppard's face.

Sick to death of "idiots who wouldn't recognise intelligent questions if they bit them on the ass", Mr Sheppard said the association would now focus on smarter public company shareholders who appreciate what it brings to the table.

"I really despair at the base level of intellect of these old dumb wits.

"My new rule is, I'm not going to spend any time with anyone aged over 60 because, frankly, their residual economic value to the rest of the country is so low they should be put through euthanasia programmes right now."

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Mr Sheppard's outburst came a day after Hanover Finance investors shouted down his request at Tuesday's vote to quiz directors and administrator PricewaterhouseCoopers further on the company's controversial rescue package.

Instead creditors voted overwhelmingly in support of a plan that pledges to pay investors their principal back over five years at the expense of interest a decision Mr Sheppard branded a "shocker".

"I'm not going to put myself or any of my executive board through the idiocy of that sort of a meeting again," he said. "It's just a waste of time they deserve all they get. If anyone asks me for advice, I'll tell them to get lost."

Present at the meeting on his own accord, Mr Sheppard said he wanted to dig deeper on the matter of receivership versus restructure because too few people truly understood the proposal.

Indeed, the meeting only went ahead after a last-gasp attempt to postpone until February, on the grounds PwC's report was too complicated, was thrown out by the High Court's Justice Paul Heath.

Although PwC's report favoured recapitalisation, it failed to clearly spell out the consequences of such a move, said Mr Sheppard, in particular that by forfeiting interest, investors would receive 55c of net present value by 2013 and not the 100c being touted.

Interest in the region of $200 million over the five-year period would be lost under the proposal in exchange for a $36 million cash injection by shareholders Mark Hotchin and Eric Watson, he said.

Furthermore, in voting down receivership investors had forgone an opportunity to chase some $86 million in dividend payments Hanover paid its owners ahead of the company's collapse.

He said: "[Investors] want to go home for Christmas and tell their wives and kids `we're getting our capital back'. They're not of course, but they want to believe it. They voted for hope and belief," he said.

Ironically, without the "stupid lunatics" who have yet to grasp the flaws of a business model that offers up equity risk in return for debt, the curtain would have already come down on the finance company industry, said Mr Sheppard.

"There's an endless stream of lunatics out there that are intent on feeding their money back into the sector you just saw 16,000 do it yesterday."

Bryan Connor, managing director of Hanover trustee the New Zealand Guardian Trust, said he hoped the sector still had a future because of its importance to the underlying economy.

"Without it it's going to be difficult for New Zealand to grow its economy," he said. "We need a mezzanine lender in that space."

The Dominion Post