We warned investors firmly about Hanover Finance in November 2006

Hanover's fucked. Half a billion dollars. From their statement this evening:

Mark Hotchin and fellow shareholder Eric Watson have pledged continued support for the business

Arguably the first time investors in these type of companies have actually supported their finance companies - instead of usually supporting themselves and their web of inter-linked companies that have been financed via these gullable "investors".

the industry model has collapsed

Model? What bloody model is that then? Property speculation and supporting the lifesyles of the promoters would be closer to the mark.

After Henderson's 5 Mile development rupture was clearly linked to Hanover it was curtains. Mr Bradbury had informed anyone who'd care to listen that from his apartment that over-looks the Hanover building he had witnessed them packing boxes for the last week and that their carpark had been largely empty too. But the writing was always on the wall. I warned our readers in November 2006:

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With Experience Comes Wisdom

After TVNZ’s veteran news anchor was cut loose by the piratical Bill Ralston I thought he could go on to keep hosting those fascinating documentaries on animals; animal feeding habits, animal homes, animal parasites, animal defecation etc. Sadly the only time I’ve seen Richard Long on television (or anywhere else for that matter) is when he’s endorsing a finance company through a series of abstract references about the nature of investing and abstract stories about family out buildings.

The advertisements for Hanover Finance are ubiquitous; and conspicuous by their absence is any mention at all as to what on Earth this company actually finances. In order of importance according to the time and prominence in its ads and commercial is Richard Long, abstract references linking history to trust, the interest rate offered, the name of the company, a TUANZ award, and the telephone number. But what are deposits financing?

Richard Long says:
”Investing is all about reliability and trust, making a choice you can rely on year after year.”
Well that’s splendid, Richard, but since even the large ads in print have absolutely no information whatsoever about this firm’s reliability – who they are or what they do.

How strange for a company at pains to stress history that it provides no hint as to how long it has existed, no hint as to what it’s track record is and no other endorsement apart from Mr. Long – and note too that he doesn’t even directly endorse it as such – it’s always in the abstract. (You know – just incase it all goes wrong.) Mr. Long voices over stories for the TV ads about some family that built a shed that survived a storm. What we would all like to know (because the shed, the family and the storm are not linked in any way to the company) is why so much time is given to an irrelevant excuse to use nostalgic imagery and not to convincing us to invest by providing… oh, I don’t know… maybe just one piece of information about who we’re supposed to be giving our money to? Indeed the issue of history and dependability is so completely avoided, and that question so desperately begs to be answered, that its failure to do so is alarming.

And what of the 8.55% being offered for 2 years, or perhaps more telling is that is the maximum rate and maturity. Trusting the firm over one year will only yield three-quarters of a percent over the Reserve Bank’s Official Cash Rate. Given inflation is hovering at almost 4% the return would hardly seem enough to justify giving it to an outfit so reluctant to divulge it’s credibility and yet that has enough funds to blitz all media sectors solidly for the last year. Almost as though… oh, I don’t know… the marketing push has to gain enough to pay the people going out the back door. I mean it isn’t an Albanian pyramid scheme or anything is it… is it. I mean it says:
Secured first ranking deposits*
That’s got to be safe, it says it is “secured” and it is “first ranking”, I mean how safe is that? Until you read the *:
*Ranking subject to prior charges (if any). Rates subject to change.
So what they mean by the asterix is “maybe – not really.” And depending on how it’s read so is the interest rate… right. OK. Hmm.

But look – it’s got an award from TUANZ (is that tourism? telecoms?) and it’s for… their call centre. So their call centre is worth boasting about, but not say… oh, I don’t know… their financial credibility. I’m sure the notorious “boiler rooms” of Thailand’s fly-by-night investment sales reps were good at what they do too: selling.

So, to recap: Hanover Finance offers a miserable interest rate (that may change to even less) for your money on a deposit that isn’t secured or first ranking (despite saying it is), whose hugely expensive ad campaign pushes “experience” and “reliability” despite disclaiming absolutely none of that about itself and whose only outside acknowledgement in its ads is for its call centre. I think the bad feng shui of their logo sums it all up: a double link of rings – but broken with a line of void right through it.

The buyer has been made aware.
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It seems as though over 15 thousand people were not so aware. In the year and a bit that followed they did put more data, tenuous data, in their ads, and then they dodged an advertising standards authority bullet:
Complaint: The television advertisement for Hanover Finance said: “Over 23 years Hanover Finance has performed constantly during a range of market conditions…”.
Complainant, J. White, was of the view that the advertisement was misleading as “..Hanover Finance Ltd has only been in existence since 2005…”.

From their statement:

The Hanover Finance book comprises approximately 13,000 investors with $465 million in debentures. United Finance has around 2,400 investors with $65 million in debentures. And Hanover Capital, offering secured preferential bonds, has around 1,100 investors with $24 million worth of bonds.

As a consumer finance business FAI Finance Limited, which is also a Hanover Finance subsidiary, is not proposed to be included in the restructure.

For further information, please contact Mark Hotchin, 09 362 7054