Allied Farmers ditches Allied Nationwide to try to save itself; Chairman Loughlin resigns

Allied Farmers ditches Allied Nationwide to try to save itself; Chairman Loughlin resigns

Allied Nationwide Finance, a subsidiary of Hanover Group loans and properties acquirier Allied Farmers, has been placed in receivership with McGrathNicol's Kerryn Downey and Andrew Grenfell appointed receivers.

Allied Farmers again blamed the trustees actions for the receivership, but pledged to fight on to try to raise fresh capital. However, it will have to do it without chairman John Loughlin, who resigned late on Friday.

(Update adds comments from Treasury on Crown guarantee, link to Deep Freeze list, comments from Allied Farmers and S&P downgrade).

The company, which is covered by the Crown retail deposit guarantee scheme, said it expects "an acceptable outcome" from the receivership based on its current net asset position and level of shareholder funds. Allied Nationwide has about NZ$130 million worth of debentures on issue held by 4,500 depositors.

Philip Combes, Treasury's deputy secretary for financial operations, said all eligible Allied Nationwide depositors will get the money they are entitled to under the Crown retail deposit guarantee scheme. Eligible depositors will be contacted by the Treasury and provided with information about how to claim under the terms of the Crown retail deposit guarantee, Combes added.

The first step in the process was gathering and verifying information about who is owed money and how much each depositor is owed. This involves receivers, bankers, trustees, lawyers and other parties and the process could take two or three months to complete.

“When the Treasury has obtained the information we need, we will contact depositors and inform them about how to claim for repayment,” said Combes.

Separately, Standard & Poor's has dropped Allied Nationwide's long-term credit rating to D from CC.

Read Allied Nationwide's statement below:

Further to the announcement this morning, Allied Nationwide Finance Limited (ANF) advises that its Directors have this afternoon requested that its Trustee, New Zealand Guardian Trust (NZGT) appoint receivers to the Company.

NZGT has advised that it will appoint Kerryn Downey and Andrew Grenfell of McGrathNicol as Receivers of ANF. McGrathNicol has been acting as independent advisors to NZGT and prepared a report on ANF which resulted in the alleged breach of its Trust Deed ratio, as advised on 6 August 2010.

ANF has been working diligently on a number of strategic initiatives that it considered would provide the Company with sufficient short and medium term liquidity, and position the Company to meet Trust Deed and regulatory capital requirements.

However the notice received from NZGT of the alleged Trust Deed ratio breach and the subsequent withdrawal of ANF’s prospectus had a significant and immediate impact on these initiatives, and the ability of ANF to continue to meet its obligations.

The Board and management of ANF will cooperate fully with the Receiver in the interests of all stakeholders of the Company, including deposit and bond investors, staff, customers and Allied Farmers as shareholder. ANF expects an acceptable outcome from the receivership on the basis of its current net asset position and level of shareholder funds.

ANF remains covered under the Crown deposit guarantee scheme in respect of its secured deposits and further information will be provided by the Receiver in relation to the process for claims under the guarantee in due course.

The demise of Allied Nationwide brings to 60 the number of finance companies and other entities to collapse or freeze investors' money over the past four years. About NZ$6.9 billion held in 203,932 accounts is now frozen or lost. See interest.co.nz's Deep Freeze list of finance industry failures here.

Read Standard & Poor's statement below:

Standard & Poor’s Ratings Services today lowered its long-term local-currency issuer credit rating on New Zealand finance company Allied Nationwide Finance Ltd. (ANF) to 'D' from 'CC'.

“This rating action follows ANF's announcement that it has not met the debenture payments that were due on Aug. 19, 2010, and today's announcement that ANF's directors have requested that its trustee appoint receivers to the company,” Standard & Poor's credit analyst Peter Sikora said. “We believe this was due to the capital and funding initiatives that the company was negotiating not being executed in sufficient time for ANF to meet its liquidity needs, including the remedy of its trust deed breach.”

We understand that ANF expects to complete an initial transaction today that could result in the payment of debenture maturities now due. We also understand that ANF has requested that New Zealand Guardian Trust (ANF's trustee company) consent to this transaction and provide a short extension to the original deadline.

ANF's slower-than-anticipated success in asset sales and new capital injection—along with some loan repayment delays—has material weakened its liquidity and cash position. Additionally, on Aug. 6, 2010, the trustee believed ANF to be in breach of a covenant under its trust deed—which saw the prospectus withdrawn from the market—and forced the company to repay all debentures as they matured; this has added significantly to ANF's liquidity pressures.

Allied Farmers said in a statement released late on Friday it had agreed to Allied Nationwide being placed in receivership and Chairman John Loughlin had resigned. Meanwhile it would continue to seek NZ$19.3 million in fresh capital from shareholders.

Read the Allied Farmers statement below:

Allied Farmers confirmed today that the Trustee’s requirement for significant additional liquidity for its subsidiary Allied Nationwide Finance had resulted in its decision to not provide it with additional support.

This decision was regrettable, as it is one of the key factors behind the Trustee’s decision to place Allied Nationwide Finance into receivership. The fact that Allied Nationwide Finance is going into receivership should not provide any credence to the alleged breach, but is the direct result of withdrawing the debenture prospectus, as the board of Allied Nationwide Finance was required to do.

Allied Farmers Managing Director, Mr Rob Alloway said Allied Nationwide Finance had been significantly affected by the withdrawal of its prospectus following the allegation of a breach of its Trust Deed received by the company on 6 August 2010.

This alleged breach, which the Allied Nationwide Finance board and management continue to dispute, had a significant impact on the company’s ability to manage liquidity and capital over the coming months. Allied Nationwide Finance continued to require funding from Allied Farmers on a scale that it could not justify in the interests of its shareholders.

“As a result of the Trustee’s actions Allied Farmers has been asked to support its finance subsidiary with levels of funding that we cannot sustain. ” he said.

“We believe the assets of Allied Farmers, including those acquired in the Hanover transaction, are best utilised for the benefit of our shareholders, most investors in Allied Nationwide Finance would have their principal and interest covered by the existing Crown Retail Deposit Guarantee Scheme.”

“That process may take several weeks to work through but in the meantime it is business as usual for Allied Farmers as we continue to work on creating value for our shareholders.”

Mr Alloway said the company was in constructive discussions with the underwriter involved in Allied Farmers $19.3 million capital raising which was put on hold when the Allied Nationwide Finance prospectus was withdrawn 14 days ago and will make an announcement when it has further information available.

Finally, it is with regret that the Board announces the resignation of Mr John Loughlin as Chairman of Allied Farmers. John joined the board in 2004 and also chaired the board of Allied Nationwide Finance. He has worked extremely hard throughout what has been a very difficult period for the company.

The company expects to announce a replacement Chairman shortly.

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11 Comments

FYI, related Speirs Group announcement here regarding a put option on the Allied Nationwide perpetual bonds they hold - http://file.nzx.com/000/508/4045508.pdf

Yes Tony but not for a while...

"Speirs Group Limited, via its wholly owned subsidiary Speirs Investments Limited, holds 2 million perpetual bonds issued by Allied Nationwide Finance Limited (ANFL), and has an option to ‘put’ those bonds to Allied Farmers Limited on or about 30 September 2013 at a price of $1 per bond, plus any accrued or unpaid interest."

"Given today’s receivership announcement by ANFL, the directors of Speirs Group Limited advise that, as part of the audit programme currently being completed for the year ended 30 June 2010, they will be considering any group impairment provisioning of the investment in ANFL bonds that may be necessary."

My understanding then is that Hanover investors, who were given shares in ALF in liue of their Hanover investment are in effect wiped out as the market for ALF shares just disappeared?

 

Looks like SCF is about to go the same way, down to a CC rating.

Marmud, are you hired by Money Managers to propagate wee porkies about  Mr Lee.   The well endowed One has never given an AAA rating to anything, let alone, Hanover.  His ratings went from E to A, no double or treble letters.

Looking on the wayback machine, the highest rating he ever gave Hanover was a B in Aug 2007, 3 years ago, link listed below.  He had been warning against Hanover for several years since.  

http://web.archive.org/web/20071207225852/www.chrislee.co.nz/Fixed+Inter...

Makes interest reading though (sniff),  of the biggies, only UDC, Equitable and Marac left out of that lot now.

 

 

Well that's a surprise!

With all due respect Tony I think that Hanover investors shafted themselves by voting for this deal.  Hanover investors had two separate decisions regarding their future and they voted for the wrong one both times.

As a supporter of Port Power ( Sth. Aust ) I nearly crapped my nappies when you mentioned that the AFL ( Australian Football League )  could be placed into receivership !

ALF ( NZX ; a.k.a. Weldonia ) my friend ! Not AFL .

At a meeting of shareholders/debenture holders of Hanover , Bruce Sheppard railed ( unsuccessfully ) against the scheme of arrangement to rid Eric Watson & Mark Hotchin of their dirty laundry . Sadly , the " blue-rinse-brigade " shouted him down . The white-knight ( Alloway / Allied Farmers ) hove into view with sugar coated promises of a new dawn ................................ And the rest is history .

Moral of the story : Next time the loon in the steel tin hat gets onto his hind-legs , shut the feck up , pin yer ears back , and listen : listen real hard !

Gosh, I never thought my first few comments on interest.co.nz would be in defence of Chris Lee, but some of the vitriol and downright deliberate lies from anonymous insurance/planning industry shills is  amazing. 

The wayback machine for Mr Lee's site  for June 2006 (that is, over 4 years ago) 

http://web.archive.org/web/20061001123840/www.chrislee.co.nz/Fixed+Inter...

I have cut his E ratings (worst of the worst) for the lazy.  Capital Merchant and Bridgecorp have been on his no-fly list for yonks, Allied and St L were B rated then which he though ok to use, but less than investment grade.  St L later rose to an A.

--- Start

 E: Bridgecorp, General Finance, Broadlands, Nathan, Boston Finance, Belgrave, Lombard, Numeria, Geneva, Orange Finance, I-Cap, Clegg & Co, Prudential Mortgage, Beneficial, MFS Pacific, Contributory Mortgage Investments, First Step, Capital Merchant Finance, Urban Finance, Rockforte Investments, Speirs, All Purpose Finance Ltd, Mutual Finance, St Kilda Finance, Westgold Finance, Asset Finance Ltd, Blue Chip Finance.

We urge clients not to use any E-rated companies, and following the demise of Provincial Finance do not recommend clients with a lower rating than B minus. We suggest client should use those rated B minus for a maximum term of two years.

--- End

By and large Mr Lee's ratings were particularly accurate; when the tide came in, they dropped pretty much according to his ordering, he just didn't predict how high the tide  would rise, but then neither did I, or many I know either.

Are you the one who was formerly known as "Red dog the pirate guy" ?

Dear

28 (now 29) year old, tony, Elliot, Shelley, Keriwin, OllyN, Shelia, The Real Red Dog The Pirate guy, The One, Anon annoy nono, Horace the Grump

and a reminder to all

We are planning to turn off unregistered comments from September 12.

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