The chill winds blowing through New Zealand's finance sector claimed another of the country's largest financiers yesterday.
Hanover Finance said it has suspended fund raising and frozen interest and debt repayments while it works on a moratorium proposal.
About 16,500 investors have NZ$554 million invested in debentures of Hanover according to
Interest.co.nz. This is down from more than NZ$800 million a year ago. About 10 per cent of the money is invested through a subsidiary, United Capital.
Fortress Credit Corp is a secured creditor.
In a statement Hanover Finance's controlling shareholder Mark Hotchin said: "Against a backdrop of global credit uncertainties, falling property prices and lower reinvestment rates, the industry model has collapsed.
"Alternate financiers are increasingly unwilling to step in, and we're also now starting to see borrowers trying to take advantage of the uncertainty to delay payments - further compounding the situation."
More colourfully, Hotchin described the climate to Interest.co.nz as "a systematic meltdown in the market".
Moratoriums imposed by St Laurence, Dorchester and Dominion last month - like Hanover, three of the larger names in New Zealand's finance company sector - made most investors wary. Reinvest rates fell to 20 per cent.
Hanover operates in Australia through Hanover Financial Services and a subsidiary, Australian Finance Direct.