Elders' books reveal more related-party lending

By Deborah Hill Cone

Friday 19th April 2002

The level of related-party lending in Eric Watson and Mark Hotchin's Elders Finance has more than doubled over the past year, new accounts show.

Total related loans outstanding at December 31, 2001 accounted for 16.5% of the loan book of $400 million, up from 6.95% at the same time the previous year.

All types of related loans totalled $67.7 million, made up of loans to subsidiaries ($15.1 million) associated parties ($20.7 million) and loans to other related parties ($31.7 million).

The new financial statements reveal for the first time Mr Watson's main investment vehicle Cullen Investments has also borrowed money from Elders, although the loan does not show up as a charge on Cullen Investments' March 26 annual return filed with the Companies Office.

Other companies linked to Mr Watson which have received loans and advances from Elders include:

Cullen Capital - wholly owned by Cullen Investments;
Brentwood Holdings - jointly owned by Hanover Group chief executive Kerry Finnigan and Mr Watson;
Plaza Developments - wholly owned by Mr Watson, it is the company used for the development of Auckland's Sebel Hotel. In February of this year a debenture with a priority amount of $7 million was still to be paid off in full;
NZL Properties - wholly owned by Hauraki Ltd, which is in turn owned by Mr Watson. Mr Watson's friend Matthew Ridge is a director of NZL Properties and the company is being used for a car-wash enterprise he is developing;
Plant Securities - a company wholly owned by Mr Watson which lent money to Vonelle Holdings, the Cullen Investments-owned company which owns Excell Corporation. Vonelle was half-owned by Hartner Group but was bought out by Cullen Investments when Hartner collapsed.

Accountancy specialists pay particular attention to inter-company debt or related-party transactions because they can obscure the true extent of indebtedness.

During the current financial period loans to three other related parties - Platinum Retail, Nationwide Finance and Courtney Investments - were fully repaid.

Mr Hotchin, who owns 50% of Elders Finance, has also borrowed money from the finance company - his loan was $1.2 million, up from $267,000 six months earlier.

Elders Finance has been growing fiercely over the past year, allowing it to report a positive profit result.

It had an after-tax profit of $4.9 million for the six months to December 31, double the $2.4 million profit of the previous year.

Mr Finnigan said over the past year Elders Finance has experienced a marked increase in total revenues, considerable asset growth and a 260% increase in its customer base.

"Our diverse lending portfolio has capitalised on a broad range of finance opportunities and been the key to achieving steady and consistent growth, ensuring the long-term security for our investors," Mr Finnigan said.

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