Boscawen John: Budget Debate 
Boscawen John: Budget Debate 
[Volume:654;Page:4267] 
JOHN BOSCAWEN (ACT) 
: 
 It is a pleasure to stand and take a call in this Budget debate. We have heard a lot over the last 2 days about the need to preserve employment the need for fiscal stimulus and the need to keep the economy growing in the face of a worldwide recession. One of the reasons I believe that we are in a recession is due to the many hundreds of millions of dollars that have been lost in finance company collapses over the last 2 or 3 years. In fact it is estimated that some $5 billion to $6 billion is tied up in moratoriums and receiverships or has otherwise been lost. This is a subject I have spoken on many times since giving my maiden speech in Parliament in November and I have called for an inquiry into the collapse of finance companies at the Commerce Committee level. 
Just yesterday as I stood on the corner of New North Road and Mount Albert Road campaigning in Mt Albert at 7 o’clock in the morning—and a frosty morning it was—I came across a local teacher who told me about his parents who had mortgaged their home in a Blue Chip New Zealand scheme. Unless the situation was resolved in the next 6 months they simply would not be able to carry on and would be forced to sell their home. 
The last time I spoke on this subject I talked about the idea that any company that wanted to vary its moratorium or to bring a proposal to its bondholders should first of all seek the approval of the court rather than go back to its bondholders. I have to say that was not my original idea; it was an idea I gleaned from listening to a person with expertise in this area who was talking on this issue. I wish that I could give him credit this evening but because of the rules of Parliament I cannot but I hope to do so at some stage in the future. I said at the time that I was aware through discussions I had had with colleagues that there was at least one company that presented to its bondholders a proposal for a moratorium that the directors did not believe could be achieved. In fact I was told that the directors of this particular company were secretly planning to go back to their bondholders 12 months hence to seek a variation of that moratorium. 
When making those comments I did not specifically identify the company involved although I understand that some 12 companies or more are involved in moratoriums. I then went on to discuss certain aspects of the moratorium on the Hanover Finance group of companies and held up in my hand the Hanover Finance document relating to that moratorium. Last week I received a letter from David Henry the independent chairman of Hanover Finance. I should record that David Henry was appointed on 1 April this year subsequent to the passing of the moratorium. He alleges that my comments contained a number of errors or omissions that needed to be brought to my attention. I totally refute the comments of Mr Henry; I do not believe I made any errors or omissions. Mr Henry went on to allege that in holding up the Hanover Finance moratorium I was insinuating that Hanover Finance was the company I was referring to when I said that there was at least one company out there that took a proposal to its bondholders that it did not believe it was capable of fulfilling. 
I do not believe I insinuated that whatsoever; they were two totally separate topics. But for Mr Henry’s benefit and for the benefit of members of this House I am very happy to record that Hanover Finance was not the company I was referring to. In fact at the end of my speech I intend seeking the leave of the House to table the letter I received from Mr Henry dated 22 May. 
However Mr Henry’s letter raises a number of other issues that I think further confirm my view that if a company wants to vary its moratorium it should go back to the court rather than to bondholders. I think that if one of the options we as parliamentarians have is to pass a law that would be the case. Mr Henry disputes my calculation as to how much the Hanover Finance shareholders would be putting into the moratorium. In particular he refers to the fact that the directors estimate that they put $66 million of additional equity by way of property into Hanover Finance. That may or may not be true and certainly that is the directors’ estimate so without a question that is what the directors have said. 
But one of the things that is not disclosed in the moratorium document—and I have it with me; it is a rather substantial document—is what debt is associated with those properties. What is the debt if in actual fact $66 million worth of property was transferred into Hanover Finance with no debt whatsoever? If those properties were to achieve only 50c in the dollar then without a doubt there would be a $33 million additional capital contribution. If however those properties were worth $166 million and there was $100 million of debt associated with them it would require only for the proceeds of sale to drop from $166 million to $100 million before the net proceeds would be wiped out. In this rather extensive document I have in my hand I cannot see any reference to the actual gearing on those properties. It does make reference to the fact that the detailed experts report is available on the website. My staff tried to find that report today on the website and have been unable to do so. I guess not surprisingly it has been taken down because this was passed into law 6 months ago. 
What I am highlighting is that when one is dealing with property and particularly vacant property—and I understand that a number of the properties passed into Hanover Finance may well have been vacant residential sections—one is dealing with very very uncertain values. If a company wanted to vary its moratorium I think it is quite prudent for parliamentarians to require the company to go to the court. I repeat that I have no evidence that it was Hanover Finance which is what the Hanover Finance chairman believes. 
One of the other issues that Hanover Finance raises in its letter is the level of disclosure. It suggests that I was being disingenuous and was suggesting that the report of PricewaterhouseCoopers was not fully reflected or that its views were not fully displayed. Hanover Finance makes the point that there is very very full disclosure in this document. I acknowledge there is very full disclosure; it is a very substantial document and the very detailed experts report was available on Hanover Finance’s website. One of the things that I note is not in the document or I certainly could not see it is the fact that over the last 2 years prior to the moratorium the directors of Hanover Finance passed dividends of $84 million to shareholders. That is my understanding. I cannot see a reference to it; I read about it on blog sites. That has no doubt been disclosed in the annual reports of Hanover Finance in previous years but I cannot see it particularly in this moratorium. I would have thought that that is the sort of information that would be disclosed. The chairman of Hanover Finance Mr David Henry has offered to meet me and to brief me fully on Hanover Finance’s finances. I intend taking him up on that offer and if necessary raising this issue on a future occasion. 
The House is involved in a Budget debate. We are discussing issues of the economy and how we reflate the economy. One of the reasons we are in this situation is that many hundreds of millions of dollars have been lost; literally billions. Those are the losses of hard-working people mainly the elderly but not totally. They are the constituents of all of us in this House. I repeat I made a speech 3 weeks ago calling for the House to make a law that would require that any company wanting to vary its moratorium would first have to go to a court and I believe that to be very very much the case. That is my speech. 
I seek the leave of the House to table a document from Hanover Finance to myself dated 22 May 2009. 
The ASSISTANT SPEAKER (Eric Roy) 
: Leave is sought for that purpose. Is anyone opposed to that course of action? There appears to be no objection. Leave is granted. 
Document by leave laid on the Table of the House.