Allied Farmers has delayed its plans to seek up to NZ$19.3 million of fresh equity through a rights issue and share placement to instituional investors for an unspecified time.
The company said the capital raising plans would be delayed while it strives to satisfy the concerns raised by Guardian Trust, the trustee of its subsidiary Allied Nationwide Finance. Allied Nationwide's prospectus was pulled on Friday as Allied Farmers disclosed a dispute with the trustee over whether the finance company had breached its Trust Deed.
Meanwhile, a recent investment statement shows further funding pressures. See story here.
The capital raising plans announced last week consisted of two parts, - an institutional placement raising NZ$2.25 million at 2.5 cents per new share, and a rights issue to current Allied Farmers shareholders entitling them to 1 new share at 2.5 cents for every 3 shares held. It would be underwritten by McDouall Stuart Group, with sub-underwriting from institutional investors, to the tune of NZ$9 million. McDouall Stuart's managing director Andrew McDouall is an Allied Farmers director.
Allied Farmers chairman John Loughlin said the issue around Allied Nationwide was its future liquidity position and how it would be funded after the Government’s guarantee expires on October 11. It had a debenture reinvestment rate of just 29.3% in May and Loughlin said a solution to the trustee’s concerns would involve Allied Farmers providing additional capital to Allied Nationwide.
"While the form of this capital is still being considered, one option may include the transfer to Allied Nationwide of some of the assets acquired from Hanover Finance and United Finance, which is in line with what we told investors leading in to the purchase of those assets in December 2009.”
He expected the capital raising to progress as planned when the company had resolved the Trustee’s concerns. "Constructive discussions" were taking place with the underwriters in relation to the temporary delay.
“I’m reluctant to put any time frame on when we will progress the capital raising but I’m expecting just a short delay,” said Loughlin.
See Allied Farmers statement below:
Allied Farmers Limited Chairman John Loughlin has confirmed a temporary delay to plans for a capital raising while it continues discussions with the Trustee of its Allied Nationwide Finance business unit.
Allied Farmers had set a record date for a $19.3 million partially underwritten capital raising tomorrow (August 10) but has decided to delay that initiative for a short period of time while Allied Nationwide Finance provides reassurance to satisfy the concerns of its Trustee.
“Our preference is for the prospectus to disclose the very latest information, and with our Trustee having some questions over our finance subsidiary we feel it is prudent to delay the prospectus,” said Mr Loughlin.
“We believe the Trustee’s concerns can be resolved quickly and we have been working towards a speedy resolution since we were informed of NZ Guardian Trust’s concerns on Friday. The Trustee is being cautious and we just need to work with them to ensure they have the level of comfort they need to allow Allied Nationwide’s current prospectus to be reinstated, therefore better positioning Allied Farmers to go ahead with the prospectus for the planned capital raising.”
Mr Loughlin said the issue around Allied Nationwide was its future liquidity position and how it would be funded after the Government’s guarantee expires on October 11.
“The finance business has been self funding for the last three years or so. While our current audit is yet to be signed off, our numbers show that continues to be the case, and we are confident we will continue to have or obtain sufficient funds necessary to pay back debenture holders. It’s important to remember that we continue to pay debenture holders on time, and that remains our focus.
“It is possible that the solution to the Trustee’s concerns will involve Allied Farmers providing additional capital to Allied Nationwide, and while the form of this capital is still being considered, one option may include the transfer to Allied Nationwide of some of the assets acquired from Hanover Finance and United Finance, which is in line with what we told investors leading in to the purchase of those assets in December 2009.”
“This support is also in line with our already signalled plan to return the Allied Farmers Group to its previous position as a strong rural services sector business that provides specialist lending to the rural businesses for farm expansion, acquisition and machinery. A strongly capitalised Allied Nationwide is an ideal vehicle with which to achieve this.”
“ We know that demand for non-bank finance is out there and remains strong while there are now far fewer competitors in the sector. We just require the time necessary to carry out our ongoing assets sales programme and make the restructuring changes to deliver on that plan to allow us to start returning value to our shareholders. The capital raising is one of the steps we were keen to progress to assist with funding for new initiatives in the rural business and to continue our debt retirement programme.”
Mr Loughlin said he expected that the capital raising would progress as planned when the company had resolved the Trustee’s concerns, and noted that constructive discussions were occurring with the underwriters in relation to the temporary delay.
“I’m reluctant to put any time frame on when we will progress the capital raising but I’m expecting just a short delay.”
Allied Farmers advises that as a consequence of these matters the Record Date for the Rights Issue will no longer be 10 August 2010. A new announcement of the Record Date will be made (and 5 business days’ notice given) and a new Appendix 7 notice will be provided to NZX in due course.