Wellington, Nov 20 NZPA - Hanover Finance is aiming to repay nearly 16,400 secured deposit investors their principal of more than $550 million within five years, under a debt restructure proposal.

At the end of June, $485m of those investments were deposited with Hanover Finance Ltd (HFL), while around $68m were with subsidiary United Finance Ltd (UFL)

In July, Hanover announced it was suspending acceptance of new investments and the repayment of existing deposits as it worked on the restructuring plan.

In an independent appraisal of the restructure plan released today, PricewaterhouseCoopers warned that HFL investors may not achieve full repayment under the proposal.

For UFL secured stockholders, there was a "reasonable prospect" they may achieve full principal repayment.

If the debt restructuring proposal was not approved the only alternative was receivership, PWC said.

Overall, PWC considered the proposal offered the secured deposit investors a greater prospect of recovering all or a larger part of their investment compared to an immediate receivership.

But PWC also said it believed that Hanover management's view of expected loan recoveries was optimistic.

Details released today confirmed that shareholders Mark Hotchin and Eric Watson will inject up to $96 million of cash and property assets, provided investors back the proposal.

The proposal, under which secured investors will have to wait until years four and five for repayment of 70 percent of their principal, will go to a vote of investors in Auckland on December 9.

Today Hanover said it wanted to retain "management's significant expertise in property and property financing".

It would continue to operate the business on a going concern basis, and was looking to continue to lend where possible subject to trustee approved protocols.

Details of the shareholders' support package included $36m of cash -- an immediate $10m to be held in a solicitor's trust account and applied to principal payment obligations if needed, and $26m in cash for debt reduction in the Axis Property Group.

There would also be a commitment for $20m through personal guarantees from the shareholders that would become available if needed to meet the repayment schedule from 2010 onwards.

Another $40m of equity would be in a portfolio of property assets in Axis Property Group, which included sections and development land at Matarangi Beach in Coromandel and property in Queenstown, Christchurch and Auckland.

Hanover chairman Greg Muir said that, if investors supported the proposal, the cash and property assets were locked in. So investors would still get the benefit of those assets if the companies failed to meet their repayment schedules over the longer term and the trustees put them into receivership at a later date.

Hanover expected UFL repayments to accelerate where market conditions allowed.

There was provision for interest to be paid to the secured deposit investors in HFL and UFL at the end of the five-year repayment period depending on the outcome of total assets realised.

Along with the secured deposit investors, HFL also had $2.2m in unsecured notes at the end of June, while sister company Hanover Capital has $24.2m of bonds.

Hanover is proposing to pay those investors 50c in the dollar, but not until after the secured investors are fully paid at the end of 2013.

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