Is Hanover Going Under? Or is Henderson?

[princess]

I humbly eat my hat - thought they had been careful enough to make it through.

[robbyp.]

Eric Watson and Mark Hotchin paid themselves $41 million either this year or last . The company obviously couldn't afford to pay them that, so why did they do it? I think the government should be stepping in here urgently, because mum and dad investors have clearly been ripped off, and it is going to cripple NZ's economy.

Funny thing is that Bernard Hickey of interest.co.nz spoke on TVNZs business program, telling us that Hanover were one of the quality finance companies.

Now I wonder if Banks will be next to lock in fund. ANZ bank looks a little dodgy, according to newspaper reports. Should we begin taking out our money from banks to lock in safes in our homes.

[k1w1]

Hanover going tits up certainly will not cripple NZ's economy.

The banks in NZ and Oz have far less exposure to US concerns than a lot of other non-US banks, so I wouldn't get too worried about it.

If you see a big queue at the local ANZ, probably a good time to join it, just to be safe, ok.

Where are you going to stash it at home that makes it safer? In a safe? Buried? I'd be worried about fire/burglary and in the case of the latter option, it being eaten by bugs and moisture.

[Commercial Dan]

Hanover going tits up certainly will not cripple NZ's economy.

The banks in NZ and Oz have far less exposure to US concerns than a lot of other non-US banks, so I wouldn't get too worried about it.

If you see a big queue at the local ANZ, probably a good time to join it, just to be safe, ok.

Where are you going to stash it at home that makes it safer? In a safe? Buried? I'd be worried about fire/burglary and in the case of the latter option, it being eaten by bugs and moisture.

Disagree, they are exposed all right, a lot of their funding comes from offshore, none of them will escape fully.

Also, best to put your $$ with Kiwibank, the Govt would step in for sure if there were any problems.

[tpr2]

Psis

Has a finance company yet traded successfully out of a moratorium?

Hi Jurgs
I was a kid at the time but didn't PSIS do just this sort of thing in the early 80's? I remember my mum and dad freaking out because all their savings had been frozen.
I think it took a year or so but in the end they got all their money back.

Of course business and financial systems were a lot different back in those days so maybe the hole PSIS had dug for them selves was not as large as the one Hanover is in.

[robbyp.]

Disagree, they are exposed all right, a lot of their funding comes from offshore, none of them will escape fully.

Also, best to put your $$ with Kiwibank, the Govt would step in for sure if there were any problems.

The governemt however has now requirement to step in should anything happen to kiwibank. Kiwi bonds would be far safer. When the BNZ went under, the government bailed them out, but they probably didn't have to.

The question is why didn't Eric Watson and CO put money back into Hanover when they saw it was failing. They could have put their dividend that they paid last year into it. I am sure that threads posted on forum such as this didn't help the company either, as it is panic that stops people reinvesting, and these business require people to continue reinvesting.

They do also have a Fitch credit rating, so why didn't the credit rating drop this year. Something fishy is going on.

[k1w1]

Of course they won't be unscathed, but I don't for one minute think the likes of ASB or Westpac is about to go under.

Do you?

[robbyp.]

Hi Jurgs
I was a kid at the time but didn't PSIS do just this sort of thing in the early 80's? I remember my mum and dad freaking out because all their savings had been frozen.
I think it took a year or so but in the end they got all their money back.

Of course business and financial systems were a lot different back in those days so maybe the hole PSIS had dug for them selves was not as large as the one Hanover is in.

PSIS, I have read some pretty recent negative stories about them recently in the paper. They aren't a bank either, so they are not as safe a bank. Personally I wouldn't have money with them.

[tpr2]

as it is panic that stops people reinvesting, and these business require people to continue reinvesting.

.

Hey they are not a ponzi scheme robbyp so they shouldn't need people to keep reinvesting to keep making payouts.

They need borrowers to keep making their loan payments so they can pay back their investors.

[tpr2]

PSIS, I have read some pretty recent negative stories about them recently in the paper. They aren't a bank either, so they are not as safe a bank. Personally I wouldn't have money with them.

Hi robbyp

not suggesting anyone put any money with them just answering Jurgs question about finance companies trading out of moratoriums.

I was in my early teens so important things like girls and rugby were occupying my attention and as such my memory is not clear on the exact details.

cheers
Terry

[cube]

Hey they are not a ponzi scheme robbyp so they shouldn't need people to keep reinvesting to keep making payouts.

They need borrowers to keep making their loan payments so they can pay back their investors.

Pretty much every finance company to go under so far has blamed 'low reinvestment rates' - does that make them all ponzis?

[graemeh]

Pretty much every finance company to go under so far has blamed 'low reinvestment rates' - does that make them all ponzis?

No.

The problem is timing, they lend the money long term and borrow it from the investors short term.

This, of course, assumes they are lending to quality borrowers who can repay them.

[graemeh]

Sorry, should have been clearer.

Ponzi scheme relies on getting more and more investors (as I understand it).

The finance companies relied on maintaining the same level of investors. When this drops they are caught.

[tpr2]

What they did was offer T+5 or 7 on the deposits but lent the money out at 6 months or more.

Not a good idea if there is a run on your deposits.

[Commercial Dan]

Is Hanover going under? Or is it Henderson?

I should change this thread to 'both going under'....this is a great lesson to all that all developers hit the wall eventually, more to come.