Taxpayer bill for Allied Nationwide could exceed cost of all government guarantee failures so far

Taxpayer bill for Allied Nationwide could exceed cost of all government guarantee failures so far

If Allied Nationwide Finance is unable to resolve its Trust Deed stand off with its trustee and Guardian Trust pulls the plug, the taxpayer could face a bill exceeding that for all the six Crown guaranteed finance companies to have failed so far.

Guardian Trust said yesterday Allied Nationwide had about NZ$137 million worth of debentures on issue. That’s down NZ$57.7 million, or nearly a third, since December 31 last year when Allied Nationwide had NZ$194.7 million worth of secured deposits on issue.

However, it’s more than the NZ$118.8 million - combined -  that the six failed Crown guaranteed finance companies owed their investors when they went belly up.

And uncertainty over Allied Nationwide's future comes as South Canterbury Finance, which has about NZ$1.3 billion worth of debentures on issue, strives to secure fresh equity to bring it back in line with its Trust Deed by August 31. Trustees Executors has waived South Canterbury's breach of its Trust Deed until then.

Treasury had total provisioning for potential payouts under the Crown retail deposit guarantee scheme of NZ$934 million at May 31.

Allied Nationwide, a subsidiary of Allied Farmers, pulled its prospectus last Friday due to its trustee’s belief that the finance company has breached a Trust Deed ratio that sets out that it must not let its total liabilities exceed 90% of the value of its total tangible assets. Allied Nationwide has 14 days from last Friday to rectify the situation.

Treasury said last month it had paid out NZ$79.1 million of principal and interest to the eligible depositors in the six companies covered by the Crown retail deposit guarantee scheme that have failed thus far.

The six are Mascot Finance, Strata Finance, Vision Securities, Rockforte Finance, Viaduct Capital and Mutual Finance who went belly up owing a combined NZ$118.8 million. However, the taxpayer, via Treasury, won’t have to cough up a sum quite that high. The guarantee covers deposits up to a level of NZ$1 million per depositor per guaranteed institution and depositors who invested, or reinvested, in some of the companies after certain dates aren’t covered by the Crown guarantee.

Allied Nationwide is covered by the Crown guarantee up till October 12.

Our Deep Freeze list shows that 199,432 finance company account holders are now owed NZ$6.786 billion frozen in 59 failed or frozen finance companies, mortgage trusts and investment trusts.

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