Allied Farmers retracts Hanover slurs, flags billion share placement

Thursday 6th October 2011 2 Comments

Penny-dreadful Allied Farmers has retracted its accusations against Hanover Finance in order to settle a $5million dispute and is preparing to issue 977.3 million new shares to its pre-Hanover merger shareholders.

The rural services company, which failed to transform itself into a major lender, has retracted accusations that Hanover behaved inappropriately when Allied took over the Hanover loan portfolio, which proved to be worth far less than investors had been led to believe.

Allied will also pay legal costs for the Hanover, the former finance company headed by Mark Hotchin. Allied Farmers reported a loss of $41 million in the 12 months ended June, slightly less than the $43 million flagged in August, when it published unaudited results.

As a result of the dwindling value of the Hanover and United Finance loan books, Allied Farmers will issue shares to pre-Hanover merger investors who were protected by a provision in case the loan book’s value deteriorated.

The company will issue 390.6 million shares, which falls within existing listing rules, and ask shareholders at next month’s annual meeting to approve the issue of a further 586.8 million.

On top of that issue, Allied Famers will have to convert $12.6 million of listed bonds into equity after failing to reach agreement with its trustee to consider ways around paying out the debt when it matures in November.

The bonds, which pay a coupon of 9.6%, traded at 47.6 cents in the dollar on the NZDX today.

Auditor PricewaterhouseCoopers, now known as PwC, tagged the report, saying there were inherent uncertainties the company will be able to meet its obligations to pay $20.7 million owed to failed subsidiary Allied Nationwide Finance Ltd.

The shares rose a tenth of a cent to 0.5 cents in trading today, valuing the company at just $10.2 million.

In December 2009, Allied Farmers issued almost 1 billion shares at 20.69 cents apiece in a debt-for-equity swap with Hanover for its loan books, which pitched a best-case scenario of returning 70 cents in the dollar to Hanover investors.

That meant they controlled about 97% of the company, which had just 37.7 million shares on offer before the merger.

BusinessDesk.co.nz

Comments from our readers

On 6 October 2011 at 2:19 pm mal said:

think they should payout the shares and then buy 20- 1 at current prices . thus increaseing the chances to go forward, As there assets are meant to be written down to about 100mil

On 7 October 2011 at 9:55 am Ivan said:

Is this the worst run company with the most incompetent management in the country. Loughin and Alloway should be racked over the coals for this.....If they can be found,done a runner haven't they.