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Lender runs out of patience, seeks $500k loan repayment from Allied Farmers

Monday 11th February 2013

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Allied Farmers says it won't be able to repay a $500,000 loan without support from its secured lender and may have to write off the asset it had planned to sell to make the payment.

The Hawera-based company says it is "very surprised" by the statutory demand for payment of the loan plus interest of about $40,000 within 15 working days because it has been in talks with the lender to try to negotiate a timetable for repayment.

Neither the lender nor the underlying asset have been identified in Allied Farmers' statements. Notes to its 2012 accounts say the company paid $500,000 in a settlement with Hanover Finance in September 2011 which was secured over a specified loan asset.

The demand for repayment is an event of default under Allied Farmers' secured loan facility and the company's secured lender has reserved its rights to act while so far not indicating whether it would provide credit to repay the $500,000.

In October, Allied Farmers said it was seeking more time to make the repayment. It was expecting the proceeds of the underlying asset in November but they didn't materialise.

The asset has a carrying value of $3.75 million. The company has been endeavouring to determine the value of the asset for its first-half financial statements.

While that process hasn't concluded, "partly as a result of this potential action by the lender the position of a number of parties may change and the underlying asset may need to be substantially if not completely written down," it said.

Shares of Allied Farmers last traded at 2.9 cents, valuing the company at $2.6 million.

Auditor PwC gave a 'Disclaimer of Opinion' on the company's 2012 annual report, saying there was insufficient evidence the group will generate enough cash from asset sales, reach agreement with some of its creditors, retain the support of its secured lender, and find new funding.

The company had tried to transform itself with the purchase of $394 million of Hanover and United Finance assets in a debt-for-equity swap at the end of 2009. Those assets are now valued at $22.4 million.

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