Hanover Finance says it is unlikely to be able to repay investors the amount they are owed because of a deterioration in the commercial property market.
Last December, Hanover's 16,500 investors agreed to a plan which would see their $554 million capital repaid in quarterly instalments over five years.
They have been paid 6 cents in the dollar so far.
Chairman David Henry says it is still difficult to recover loans, given current property values, and the directors estimate secured depositors are likely to only get 70 cents in the dollar back.
Hanover says investors in subsidiary United Finance can expect estimated returns of around 90 cents.
However Hanover says it cannot forecast any repayment for subordinated note and bond holders at this stage.
Milford Asset Management executive director Brian Gaynor, says the market downturn means Hanover's current projection could be over-optimistic.
Mr Gaynor says Hanover is struggling because it lent huge sums on projects of poor quality which would struggle to find a buyer.
