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Bernard Hickey details the key news overnight in 90 seconds at 9am in association with BNZ, including news that South Canterbury Finance has announced losses of NZ$229 million on loan provisions and asset writedowns, forcing its owner Allan Hubbard to recapitalise the Timaru based finance company. See more detail here.

Hubbard will inject Helicopters Ltd and Scales Corp into South Canterbury in exchange for new South Canterbury shares. South Canterbury now needs to retain its BB credit rating if it wants to remain alive beyond the end of the current government guarantee in October. South Canterbury owes more than 40,000 investors over NZ$1.5 bln.

Meanwhile, Allied Farmers has reported a NZ$220 million writedown on its assets acquired from Hanover Finance just two months ago. It has uncovered problems with loans and delays with projects. It also found ‘unusual things’ in documents that it has referred to authorities for further investigation. See more detail here.

Standard and Poor’s has also given Allied Nationwide Finance a BB minus credit rating, which is less than required to retain its deposit guarantee. Allied hopes to win a one notch upgrade later in the year.

By Bernard Hickey

Rural services and finance group Allied Farmers has released first half results showing it has written down the value of Hanover Finance and United Finance assets acquired just two months ago by NZ$220.7 million to NZ$175.5 million because of new accounting rules and the discovery of delays and problems with some projects and loans.

Some of the details of the transactions arranged by previous Hanover Finance owners Mark Hotchin and Eric Watson had also been referred to authorities, Allied Farmers said. (Update 1 includes S&P giving Allied Nationwide Finance a BB minus credit rating, which Allied says is one notch below the BB rating needed to be in the government’s deposit guarantee scheme (Corrected from earlier saying BB minus is just enough for scheme), Update 2 includes CEO’s reaction to rating)

Allied Farmers Chief Executive Rob Alloway told interest.co.nz most of the writedowns were required under international reporting requirements that use the net present values of assets rather than total cash returns, but that some loans were now worth less than Allied Farmers estimated when it bought them in December because of underlying problems with their performance.

The NZ$210 million development of stage 1 of the Kawarau Falls hotel and residential project near Queenstown was now 4-5 months behind schedule and ’significantly’ over budget, Alloway said. Hanover Finance had a second mortgage on the project, which is now in receivership and being managed by receivers Korda Mentha.
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Shares in rural financing group Allied Farmers collapsed 32% to 10c a share this morning after Allied Farmers notified the market that 1.91 billion new shares had been issued to Hanover Finance investors in the wake of the debt-for-equity swap proposal voted through by a whisker last week. (Adds comments from Allied Farmers on how Hanover investors can get hold of their shares and closing price)

Just over 1.4 million shares were traded in the first hour and the share price closed at 10 cents after 4.2 million shares were traded.

The slump in the share price since the vote last Wednesday mean Hanover Finance investors have lost 52% of the value of their shares in four days. The shares were issued at 20.7 cents a share.

Allied Farmers said it expected Hanover and United investors would be notified of their share allocations and FIN numbers from Tuesday onwards.

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Bernard Hickey talks to TVNZ 7’s Greg Boyed about the outlook for Allied Farmers and Hanover Finance investors after Allied’s proposed debt for equity swap was approved by investors by the narrowest of margins.

Bernard Hickey details the key news overnight in 90 seconds at 9am, including news the result of the Hanover Finance vote yesterday was very close with 75.45% voting for the Allied Farmers bid, which was just above the 75% threshold needed.

Now many Hanover Finance investors will look to cash in their shares. The share price is likely to drop from 19 cents as over 200 million shares hit the market.

Meanwhile the Capital Markets Development Taskforce has recommended the creation of a single regulator to replace the Securities Commission the companies office and the regulatory functions of the NZX. It has also suggested the government sell SOEs in partial flotations to stimulate investor interest in stocks.

Finally, Westpac has forecast that a cut in the top tax rate to 30% from 38% would cut property prices by 14%.

I’m at the special meeting of Hanover Finance and United Finance investors at the Ellerslie convention centre in Auckland where they will vote on Allied Farmers’ debt for equity swap proposal. Here’s what the experts have said investors should do. Here’s what I’ve written previously about the choices investors face.

The Allied Farmers Proposal is dependent on 75% of Hanover and United Finance investors voting in favour of the Proposal.

Meeting chairman and Hanover Chairman David Henry has opened the meeting with a presentation of the proposal, including noting that the volume weighted average share price for Allied Farmers shares for the deal is likely to be around 20.7 cents a share, meaning the debt for equity swap would be 3.4 shares worth 72 cents for each dollar invested by Hanover Finance investors. The original value mentioned was 35 cents a share.

The chairman has also banned the use of video cameras at the meeting, which is different from earlier roadshow meetings.

Alloway presents proposals

Allied Farmers Managing Director Rob Alloway is now talking about the proposal to the meeting. The mood is restless. There are complaints about the sound system. A video of Allied Chairman John Loughlin is played, although the sound didn’t work at the first attempt. There are grumpy murmurs.

Most of the audience are elderly. It is a sea of white hair and they are much grumpier than this same meeting a year ago when they voted for a moratorium for Hanover Finance. There appears to be between 800 and 1,000 investors in attendance.

“That’s what they told us last time,” says one tanned and elderly man, when the chairman talks about a positive outlook for the future under the Allied Farmers deal.

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