Perpetual Trust, which is a trustee for investors in United Finance and Hanover Finance, has told investors there are significant risks and uncertainties around Allied Farmers' bid for a debt-for-equity swap, but that there were uncertainties around other scenarios. Perpetual declined to make a recommendation one way or the other for investors due to vote on the proposal on December 16. Here is Perpetual's letter to investors and some of its comments below.

Perpetual Trust chief executive, Louise Edwards, said no matter how investors voted there are significant risks and uncertainties. "There are three scenarios which investors need to consider. "The first is that the Allied Farmers proposal is accepted by investors. The second is investors vote against the proposal and continue under the current debt restructuring arrangements. The third is the Allied Farmers proposal is voted against but Hanover and its subsidiaries eventually go into receivership. "Regrettably, no matter what investors collectively decide, there are significant potential downsides, risks and uncertainties for them in each scenario. "In the case of the Allied Farmers proposal, the recent financial performance and financial position of Allied Farmers has been varied and the outlook for Allied Farmers is not certain, despite the benefits of the transaction identified by Grant Samuel in its report, including increased equity. "There is no certainty as to what price the Allied Farmers' shares will trade and it is possible, especially in the short-term, that the share price may trade at a material discount to the price at which the Allied Farmers shares are issued to investors. Any upside is totally dependent on the market price of the shares received, and on any dividends, for which no projections are given. "However, the directors of Hanover Finance and United Finance have advised that full repayment under the debt restructure that investors agreed to last year is unlikely. There has been a significant write down in asset values since the vote and the forecast payout that management now believes is possible has been reduced. The timing of recoveries is also uncertain. "The third scenario is that the Allied Farmers proposal is voted down and Hanover and its subsidiaries default. There are currently no defaults under the debt restructure. If the companies were to default a potential outcome is that the companies would be placed in receivership. In that scenario and the Allied Farmers proposal, the two principal shareholders, Messrs Hotchin and Watson are relieved of their obligation to back investors with their $20 million pledge (except where receivership is caused by the default of the principal shareholders). In a market of falling property values, the outlook for investors is uncertain. "Our letter aims to provide an overview of the transaction and observations from the Grant Samuel report, and to highlight our areas of concerns and various matters which we believe investors should take into account when making their decision. "Our role is not to advise investors on how they should vote. That is a question for investors based on their individual circumstances. We are seeking to make sure that investors have sufficient information they need to make a decision in their best interests. I re-iterate that this is a complex decision and a significant departure to what investors originally invested in and a shift away from the debt restructuring plan that investors voted for in December last year. If in doubt investors should seek independent advice from someone they trust." Perpetual Trust is trustee for the secured debenture stockholders in United Finance Limited, the subordinated unsecured noteholders in Hanover Finance and the secured bond holders in Hanover Capital.