Shares in Allied Farmers ended 9.8% lower today at just 4.6 cents, less than a quarter of the price 1.91 billion shares were issued at to 16,400 Hanover Finance Group debenture holders last December.
(Updates include closing share price and add background).
The fall follows news out late on Friday that Standard & Poor's was cutting its subsidiary Allied Nationwide Finance's credit rating to B from BB minus and putting its outlook on CreditWatch with negative implications because of a deterioration in its cash on hand.
Grant Williamson, director at sharebroker Hamilton Hindin Greene, said there had been continued bad news since Allied swapped its shares for Hanover investors' debentures last December in a deal valued at NZ$396.2 million. Allied's market capitalisation today was just NZ$99.5 million.
Allied recently said, following a series of writedowns, the finance interests it acquired from Hanover and sister company United Finance were now worth just NZ $124 million, 69% less than the price paid just 6 months ago.
"A lot of the Hanover debenture holders are fed up and are hopping out at any old price," Williamson said.
"Investors don't have any confidence in the Hanover book and what it might provide for Allied. The environment doesn't seem to be getting any better for the Hanover loans."
The Allied shares issued to Hanover debenture holders last December were valued at 20.7 cents each. Prior to the deal there were just 37.7 million Allied Farmers shares on issue.
"The shares are now at a level where you wouldn't expect to see much more downside," Williamson added.
Allied Farmers chairman John Loughlin said last November when the firm signed the deal with the then Mark Hotchin and Eric Watson owned Hanover, that it had carried out detailed due diligence on the Hanover and United assets with the help of external advisors including investment bankers, accountants and lawyers.