Allied Farmers, the ailing finance company with a bloated 2.04 billion of shares valued at NZ$6.1 million, is preparing to convert twice its market capitalisation worth of bonds into equity while attempting to shrink its overall register.
The company intends to convert its NZDX-listed capital notes into ordinary shares when they mature on Nov. 15. There are NZ$12.6 million of the 9.6 percent bonds outstanding, which are being quoted at a yield of 2,500 percent on the NZX website.
The final number of shares issued won’t be known until the close of trading on Nov. 14. The capital restructure will cause further wild gyrations in Allied’s stock on issue, which soared when it used shares to buy the loan books of finance companies Hanover and United. The stock was last quoted at two-tenths of a cent.
At the same time, it is proposing a one-for-100 share consolidation, which would reduce shares on issue to about 200 million and lift their value to 20 cents. Allied issued shares at 20.69 cents apiece to buy the Hanover and United debt, touting a best-case scenario of returning 70 cents in the dollar to the beleaguered investors in the failed finance companies. That meant they controlled about 97 percent of the company, which had just 37.7 million shares on offer before the merger.
Unfortunately the share changes are more complex still. Holders of bonus securities issued to shareholders before the Hanover deal will be recognised as holding 118 million shares in time for the consolidation. In addition, it will issue 391 million out of 977 million shares pursuant to the terms of the price adjustment right (PAR) that was part of last August’s share placement.