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Allied Nationwide rating cut

Thursday 12th August 2010

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Allied Nationwide Finance had its credit rating cut to `CC’ from ‘B’ by Standard & Poor’s after withdrawing a prospectus, a rating that means it is "highly vulnerable" to default.

The finance unit of NZX-listed Allied Farmers withdrew its prospectus after trustee Guardian Trust said it was in breach of its trust deed. The parent company has said it disputes the breach and is in talks to try to placate the trustee.

S&P kept Allied Nationwide’s rating on CreditWatch Negative, meaning there is a chance it could be cut again. The yield on Allied Farmers’ NZX-listed November 2011 bonds reached 65% yesterday. They carry a coupon of 9.6%.

Separately, Allied Farmers said it had further slashed the value of the property and loan assets acquired from Hanover Finance and United Finance to $94.3 million from the $124 million estimate given on May 28.

The assets were valued at almost $400 million at the time of acquisition and the Allied shares received by the finance company investors were ostensibly worth about the same amount.

The additional impairment provisions and fair value adjustments are made up of $24.5 million on property assets and $57.8 million on loan assets. The value of assets may be pertinent to Allied Nationwide because the parent company has suggested it may have to tip in some of the Hanover and United book into the subsidiary to placate the trustee. 

Shares of Allied Farmers fell 7.9% to 3 cents on the NZX, valuing the company at about $80 million.

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