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Allied Farmers still faces Allied Nationwide tab in the tens of millions
Cash strapped Allied Farmers will probably have to cough up something north of NZ$10 million owed to Allied Nationwide Finance (ANF) despite receivers being appointed to its subsidiary last Friday.
Bryan Connor, general manager for corporate trusts at ANF trustee Guardian Trust, told interest.co.nz that Allied Farmers was expected to honour NZ$10 million owed to ANF through a credit enhancement facility. This facility provides for ANF to be reimbursed by Allied Farmers for current or future losses on nominated loans.
Connor also revealed the trustee had been concerned about how ANF would've coped with NZ$70 million worth of debenture repayments due by October 31 and that prior to the receivership Guardian Trust had decided not to approve the sale of some loans at discounted values.
“We would expect them to honour that (the credit enhancement facility) and the receiver would be pursuing that I am sure,” Connor says.
There’s also long standing debt factoring arrangements between the two. According to ANF’s latest investment statement, Allied Farmers owed ANF NZ$20.8 million as of June under these arrangements, plus a further unspecified NZ$3 million. That made a total of NZ$33.8 million owed by Allied Famers to ANF in June. However, Connor says the sum today would be lower than this given much of the debt factoring facility covered seasonal factoring including merchandising and stock related to Allied Farmers’ rural services operations.
“The receiver is certainly talking to the parent company about how to move forward with that (the debt factoring facility),” Connor says. “There are already discussions going on about how to make it work.”
Allied Farmers itself put on hold plans for a capital raising of up to NZ$19.3 million earlier this month until the ANF situation was resolved. It is striving to payout Westpac loan facilities valued at about NZ$19 million by calander year's end and, according to its last interim report, also had NZ$30.8 million of bank borrowings secured over property assets acquired from the Hanover Group last December that was classifed as current.
NZ$70 million of debenture repayments due by October 31
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McGrathNicol's Kerryn Downey and Andrew Grenfell were appointed ANF receivers last Friday. Their appointment came as a 14 day period Guardian Trust had given ANF to rectify what it deemed to be a breach in the company’s Trust Deed expired. The Trust Deed ratio under question set out that ANF must not let its total liabilities exceed 90% of the value of its total tangible assets.
ANF, which is covered by the Crown retail deposit guarantee scheme up to October 11, ANF has about NZ$130 million worth of debentures on issue held by 4,500 depositors.
Guardian Trust recruited McGrath Nicol to compile an independent report on ANF prior to the receivership. Connor says this was because the trustee had “received some information that we thought we needed to investigate further.” He won’t say what the information was or who it came from. But he will say the trustee had asked McGrathNicol to look at what it called the “toxic” loans, impaired assets and ANF’s top 10 assets by value that were still performing. The latter was “just to get a feel if there was anymore risk,” Connor says.
“They looked at all the impaired assets, they looked at all the reposessed assets and they looked at the top 10 assets that were performing, but we wanted to get a bit of a feel if there was anything else in the pipeline.”
He says the big issue for the trustee was liquidity given ANF had about NZ$70 million worth of debenture stock to repay before October 31. ANF’s debenture reinvestment rate was just 29.3% in May, down from an average of 48.2% in the six months to April.
“We could see clearly that they were going to struggle to get through to October 31, which was after the guarantee,” Connor says.
“They had about NZ$70 million of debenture stock to repay between now and October 31. That’s a huge, huge commitment and how were they going to do that?”
ANF was “really struggling” to give Guardian Trust a clear understanding of how it was going to get there without “decimating” its good assets and good loans.
“All we were going to do then was end up with a book that had a substantial proportion of toxic loans in it compared to the good loans which could only be to the detriment of debenture holders at the time,” Connor says.
Asked how big the proportion of “toxic” loans might have got he replied: “Very high in my view. We showed the company the number. They didn’t agree or disagree.”
Connor says Guardian Trust could have solved the Trust Deed issues temporarily by approving the sale of some loans at discounted values.
“But that’s not going to get anybody anywhere,” says Connor.
“We thought it was prejudicial to sell loans like that so we couldn’t agree to it. So that’s really want caused things to tip in the end.”
NZ$130 million loan book
He says ANF’s loan book was latterly worth about NZ$130 million. Including Speirs Securities, its biggest exposures as of December 31, 2009 were 23% to the rural sector, 22% to the transport, storage and aviation industries and 13% to property development and investment.
When Allied Farmers acquired the Hanover Group's property and loan assets in a deal valued at NZ$396.2 million last December, it said it hoped this would enable it to strengthen ANF's balance sheet through the contribution of “quality loan assets as an injection of capital.” It anticipated this would pump at least NZ$50 million of new equity into ANF. However, Allied Farmers now says the assets it acquired from Hanover have collapsed in value to be worth just NZ$94.3 million at June 30.
The demise of Allied Nationwide Finance brings to 60 the number of finance companies and other entities to collapse or freeze investors' money over the past four years. About NZ$6.9 billion held in 203,932 accounts is now frozen or lost. See interest.co.nz's Deep Freeze list of finance industry failures here.
* This article was first published in our email for paid subscribers earlier today. See here for more details and to subscribe.
33 Comments
Gareth - No comment from Rob
Gareth - No comment from Rob Alloway? Is he away on holiday?
"collapsed in value" Gareth
"collapsed in value" Gareth !!! the question of who valued the "assets" still needs answering. The whole thing has a bad smell about it.
And yes where is Rob so you can ask him"Who valued the assets"
I await an answer
396 million to 94 million in
396 million to 94 million in 6 months.
Who valued the 'assets"?
Bernard Hickey can you help?
This is a very interesting question? Any answer would be most entertaining!!
Supposedly astute business
Supposedly astute business people paid 4 x the current value. I dont buy it. Something smells really putrid?
4 x the value and Hotchin and
4 x the value and Hotchin and Watson off the hook!!! All is not well in the land of transparency.
And these same directors
And these same directors think that they can get Allied Farmers to fly again. I notice that they are renegotiating with Westpac. No doubt, Westpac are struggling to see how ALF can pay its pledged loan of 10 million to ANF, as well as the money owed to the Westpac bank. ALF were all ready to sell stuff off at much reduced prices just to save its finance arm. Luckily the trustee put a stop to that.
Will the rights issue actually happen? I have a feeling that the underwriter may need to look at the "out clause" because just like the last rights issue, it may not be supported all that well. ALF have massive debts and hardly any income!
GPG examined the carcase of
GPG examined the carcase of Hanover at the same time as Allied Farmers. They pronounced it dead and promptly disposed of their holding in Allied Farmers for around .27 cents per share. GPG are professionals at such. Allied Farmers are most clearly not. Mr. Alloway would appear to be well out of his depth. Mr. Loughlin would appear to be an overweight lightweight. Messers Mallon and McFee would appear to be puppets. Allied Farmers shares would appear to be toxic at any level. They 'purchased' Hanover because they were anything but solvent. Are they now about to dissolve?
so you see it as a case of
so you see it as a case of "bungling morons" not some fraudulent back room dealings to save Hotchin and Watsons collective arses.i.e ALF is already stuft so we will save your arses and we will stuff some cash into your pockets latter on plus some Hawaiin property for you to live in, stuff NZ who cares we are all leaving anyhow
Trouble is one of your morons is our chairman-Zespri
I just wish that the gov.
I just wish that the gov. have forced hanover into stat. man., to protect investors money, years ago. From the look of it, many hanover investors are going to come out of this with nothing but a huge loss. And were are the hanover directors these days, or Richard Long. I wonder what has happened to that shed, that was able to 'withstand all conditions'
The question of the $10
The question of the $10 million or so owed by Allied Farmers to Allied Nationwide. I seem to remember something about a $5 million payment from Allied Farmers to Hanover that probably hasn't been resolved yet. Allied Farmers do stock rope.....
I get the rope drift!! Did
I get the rope drift!! Did Richard Long have money in this company like he said or was he part of the fruad.
What if Alloway and Loughlin
What if Alloway and Loughlin had to admit to the shareholders and debenture holders that they never got a valuation done. Lets see it then. Seeing as it was this 'supposed valuation' that they used to convince.............. if it never existed?......isnt that ?.......fraud?.......jail time?
Then show us the valuation and tell us who did it!!
Re: 'The Old Shed' and
Re: 'The Old Shed' and Richard Long. Hanover previously traded as Elders Finance. This entity was not part of the Elders Australian conglomerate but a name licenced to parties within New Zealand post the withdrawl from New Zealand of Elders Australia in the 1990's. Elders Australia only arrived in New Zealand in the late 1980's and had a very short life. Interestingly the advertisment for the 'Old Shed' stated Elders Finance were 'with them' in the early 1960's? The whole Elders, Hanover, Allied Farmers, Allied Nationwide scenario has been nothing but a pantomime from the onset. Three down....
Hanover traded with Richard
Hanover traded with Richard Long as spokesman, and the old shed well after they changed their name from Elders to Hanover. They changed the name many yeras ago now. I got my money out of Elders not long after they changed the name to hanover.
RJ, I agree it would be
RJ,
I agree it would be interesting to know definitively who did/didn't value the Hanover loans and "assets" on Allied Farmers behalf and I'll ask the company again next time I speak to them. Or maybe you know something?
That said, at the end of the day the Allied Farmers board signed off on the deal so the buck stops with them.
Confused Not,
I interviewed Tony Gibbs late last year after GPG had kicked the Hanover tyres and decided to flee when I was working for Fairfax. His quote was a classic:
"It looks like taking a pile of custard from one plate and putting it on another," Gibbs said. "You've got a loan book which basically no-one's able to value."
Here's the story from last December - http://www.stuff.co.nz/business/industries/3164579/GPG-gets-rid-of-Allie...
Cheers.
FYI, new Allied Farmers
FYI, new Allied Farmers announcement out - http://www.nzx.com/markets/NZSX/ALF/announcements/4060689/BANKING-FACILI...
Sorry that I am obsessed. I
Sorry that I am obsessed. I dont know anything. It just didnt look good from day 1 and I couldnt work it out logically, so I presume there is something we havent been told.
Ask Bruce Shepherd, he might have an answer?
Tony Gibbs might be good to ask. Putting the boot into his Zespri foe Loughlin, he might like?
Either as has been said they were incredibly dumb (and I cant believe they could be.Zespris in trouble then!!) or..............Its fraud somehow?
Cheers RJ. You are right.
Cheers RJ.
You are right. The whole deal was/is pretty curious.
This was as much about
This was as much about bailing out A & L as Allied was insolvent at the time of the deal. It did not matter at all to Allied what they "paid' for the book as there was no cost to Allied and it gave them a fighting chance if they could get their hands on any cash they could realise from the Hanover Loan book - Where has that money gone and it would be interesting if they could produce documented evidence of a third party valuation of the Hanover loan book.
As deep throat said to the journalists about Watergate "just follow the money"
So the questions Gareth or
So the questions Gareth or Bernard need to ask Rob are?
1. Show us the valuation?
2 Who did the valuation? if they can produce one(not)
3. Where has any money gone?
4. You set out to deliberately defraud already defrauded Hanover investors didnt you?
5. In light of the answers above how do Zespri shareholders feel about you John?
6. Hand me your passports!!
Is Alloway out of his depth?
Is Alloway out of his depth? He has informed Allid Farmer's feild staff that quote "I want you all driving Prados and carrying i-Phones". Flash stock agents, the cockies just love that. Perhaps he should have said "I want you all driving Ladas and unsing the landline" when ones realises the parlous state ALF is probably in. He is a qualified electrician, I have a commerce degee. I don't play with wires.
Gareth: I remember the article well. Custard was a polite term. Mr. Hotchin may be on the island of Hawaii. Mr. Alloway may have issues with even an island off New Zealand shores. The first issue would be his finances possibly, the second being the fact that he seems to be adopting the guise of a stoat on methamphetamine. He may require a DOC permit to leave the mainland.
maybe there could be a
maybe there could be a corporate form of 1080 for destructive pests
I cannot believe that SFO is
I cannot believe that SFO is not all over this . The stench is sky high Zespri do have a problem and i think they need to deal to it quickly and cleanly.
I have already phoned my
I have already phoned my grower rep and voiced my opinion
Will 'Rob the Stoat' fall
Will 'Rob the Stoat' fall victim to his own predations?
I want the SFO sniffing
I want the SFO sniffing around
I see from the Investment
I see from the Investment Statement (pg 3) they can't even spell the name of Speirs Finance correctly (it is shown as Spiers....)
Dear me
apparently if its not fraud
apparently if its not fraud they couldnt add either. It added up to 94million in assets not 394million
apparently if its not fraud
apparently if its not fraud they couldnt add either. It added up to 94million in assets not 394million
apparently if its not fraud
apparently if its not fraud they couldnt add either. It added up to 94million in assets not 394million
RJ, Good posts. The
RJ, Good posts. The conspiracy theory should also look at the tie-ups with Allied Capital and the investors involved with them. The Resimac deal is another. Check out the Resimac spokesperson and there's another tie-up.
The need to do the Hanover deal was rushed and obviously they "paid" too much for a dodgy loan book. For example: Kincloch was on the books, but it was only a 2nd mortgage and as such was never going to be an earner. Consequently, Kincloch was ditched for no gain. This sort of due diligence tells you that Allied were desperate.
The wealth destruction to original ALF shareholders and Hanover investors was a side issue for these guys! There number of new shares to be issued were based on the shareprice being around the 35 cent mark and higher. They basically didnt really think that the SP would be any lower than that. GPG and Gibbs came in and lowered the SP. Gibbs was toying with them and we know why.
Loughlin is now gone and I see that another ANF board member has followed. The others are hanging around for what purpose? ANF is defunct so the ANF board is no longer needed.
Will the rights issue be underwritten? Will it be supported. This is the next factor that will either make or break ALF. If it is not underwritten then the board would have made the decision that ALF is doomed
Echo Capital is the link. The
Echo Capital is the link. The ex Hanover executive who owns Echo Capital has an intimate knowlesge of both companiess and their businesses and personalities and he put this deal together. These guys are smart enough to know they where selling and buying a dog with an incurable case of the flees.
Legalised robbery with a masterplan devised by an investment banker and "Wally" of a lawyer based in a ivory tower in Auckland.
WOW !! reading all the
WOW !! reading all the comments above I just got a great write up of everyone in our New Zealand Financial Wizards...maybe i should start on a book soon....