Gaynor:- Hanover House of Cards

Brian Gaynor looks at the Hanover mess in his Herald column. Well worth reading and reflecting upon.

Look as well at the comments in the SST today about aspects of the Allied takeover of the Hanover book.

Just what is it about the NZ marketplace that allows these things to happen?


3 responses to “Gaynor:- Hanover House of Cards

  1. If you read the document for the transaction you can see that the 70c in the dollar and $396m was a Hanover liability value (after a release), not an asset value. The issue price of the Allied Farmers shares was expressed in terms of the discharge of the Hanover liability. When Allied Farmers accounted for the transaction it was required to credit the present cash value, not of the liability discharged but the Hanover assets it acquired. This was much less than the nominal value of the liability Hanover investors exchanged for the shares. The result is that the $396m value talked about at the time of the transaction was merely nominal. However, if you had have read the document, you would have seen it.

  2. I do not disagree.

    My point overall was that people need to inform themselves.

    I was not as clear as I should have been on that point.

    However, as an accountant, I should like to see a regulatory framework that protected investors somewhat more appropriately than our currnt one

  3. Well it is quite a difficult issue. Our securities laws are principally disclosure based, and as you have mentioned people need to inform themselves, i.e. use the disclosures available to make good investment decisions. This leaves investors and producers of financial products free to take risks and offer risks, and people free to make bad investment decisions, and I guess it means some people have to lose money on bad investments as a way of giving the others an incentive to be informed and prudent investors. Trying to set out to enforce or encourge prudence, isn’t that a can of worms?

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