Allied Farmers finding asset sales hard going

Monday 11th April 2011 1 Comment

Allied Farmers is finding the sale of assets harder going than it had expected, and it is unlikely to be able to repay a loan to its collapsed finance arm on time.

A decline in forecast sales to June 30 this year was due to challenging conditions driven by market saturation of finance company assets, Allied Farmers said today.

Some other finance companies, many in receivership and beneficiaries of the Government's retail deposit guarantee scheme, were in a similar position.

The difficulty selling assets has affected Allied Farmers' ability to fully repay, within the time intended, a loan to subsidiary Allied Nationwide Finance, which was put into receivership last August.

In October Allied Farmers announced it had entered into two loan agreements with Allied Nationwide Finance.

Under those agreements, existing arrangements were converted into two separate loan facilities with Allied Nationwide Finance under which Allied Farmers Group assets were secured by a composite general security deed.

The first loan facility, initially totalling $8.9 million, was granted to Allied Farmers Rural and now had a current outstanding balance of $7.5 million, Allied Farmers said. It is due for repayment by July 1.

The second loan facility was granted to Allied Farmers. It has an outstanding balance of $11.7 million, and is due for repayment by July 1, 2012.

At the time the loan agreements were entered into, the Allied Farmers Group's financial forecasts showed the group would earn enough from asset sales to fully repay the first loan on time.

The board has now reviewed the forecasts, and now indicate that it would be difficult to conclude enough sales by the end of June to fully repay the balance of the first loan.

But some assets would be sold by then, further reducing the outstanding balance under that loan, Allied Farmers said.

If Allied Farmers Rural did not fully repay the first loan facility on time it would constitute a further default under the Allied Farmers Group's funding arrangements with Allied Nationwide Finance.

That would be on top of an alleged default in relation to a disputed guarantee by Allied Farmers, and another in relation to the receivership of Matarangi Beach Estates, both previously disclosed.

Allied Nationwide Finance had advised Allied Farmers it had reserved its position in relation to those defaults.

Allied Farmers managing director Rob Alloway said the sale of properties it owned at Jacks' Point and Clearwater meant it had been able to reduce debt on those properties from $13.3 million at the end of 2010 to $10.4 million now.

Sales contracts that were expected to settle before June 30 would result in further debt retirement of about $4.7 million.

"Furthermore, we are confident that, in such a strong rural environment, our rural business will be able to generate solid revenue and growth in some areas," Alloway said.

That was important because the rural business assets were a component of Allied Nationwide Finance's security package.

NZPA

Comments from our readers

On 12 April 2011 at 10:15 am Ivan Turk said:

More good news for Hanover investors. How long before the last of these dogs falls over taking investors money with it.