Hanover debt haunts Allied Farmers

HSBC demanding repayment of NZ$19m loan from Allied Farmers on former Hanover property

12th Nov 10, 5:34pm by Gareth Vaughan

Beleaguered Allied Farmers says HSBC is demanding repayment of a NZ$19 million loan on Matarangi Beach Estates Limited, which it inherited from Hanover Finance, and is now valued at just NZ$7 million net of debt.

The loan is part of NZ$44.3 million worth of debt secured against Hanover properties held by three banks and two other financial institutions marked as current in Allied Farmers' June year annual report, meaning it was due for repayment within 12 months.

Allied Farmers said Matarangi Beach Estates had received a notice from HSBC cancelling its loan facility, thereby requiring the NZ$19 million loan be repaid. Matarangi Beach Estates was also one of the property development assets contributed by Hanover owners Mark Hotchin and Eric Watson to that company's 2008 debt moratorium at a net value of NZ$26 million.

The carrying value of the property at June 30 this year was just NZ$7 million net of its debt.

"While this action on the part of HSBC is disappointing, this has always been one of the difficult assets in the portfolio," said Allied Farmer’s managing director Rob Alloway .

"We haven’t achieved the property sales we have needed with this asset and a recent campaign to sell the entire development was not successful."

"Among the issues we have faced with it is that HSBC’s consent to the change of ownership of Matarangi Beach Estates Limited was still outstanding because it was seeking replacement shareholder guarantees while we were not prepared to put the group’s wider assets at risk.”

Alloway added that HSBC’s action was expected to start a further process that could see the asset sold. It wasn't known - at this time - what the impact of HSBC’s action would be on Matarangi's value, Alloway added, but a further reduction in value was likely.

"Further announcements will be made as matters progress."

Allied Farmers acquired Hanover Finance and sister company United Finance's loans and properties in a deal valued at NZ$396.2 million last December. As of June 30 it had written down the value of these assets to just NZ$94.3 million. The group's unaudited annual loss was NZ$79.14 million, or NZ$77.6 million, when its now in receivership subsidiary Allied Nationwide Finance is included.

The group's auditor, PricewaterhouseCoopers, said in its annual report that although the financial statements were prepared on a going concern basis, the validity of the assumptions depended on Allied Farmers to generate sufficient future cash flows from various funding initiatives.

These include resurrecting a capital raising of up to NZ$19.3 million suspended in August when Allied Nationwide Finance collapsed.

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10 Comments

by Wolly | 12th Nov 10, 5:40pm 1289536846

I don't understand....why did Allied pay that much for so little?

by Boatman | 12th Nov 10, 5:55pm 1289537754

Wollly , there is a strange dynamic at play here , and its a case of Kiwi investors being slaughtered like sheep .

1) Allied Farmers was in trouble and they bought Hanover by simply issuing more paper. Shareholders in AF were slaughtered in this dilution. AF paid nothing in hard cash

2) Hanover Investors were also slaughtered AND THEY EVEN VOTED IN FAVOUR OF THIS DEAL . This is like Turkeys voting for Christmas.

3) I often wonder if John Loughlin and Mark Hotchin and Eric Watson have not had some crony shonky association in the past

by Wolly | 12th Nov 10, 6:01pm 1289538070

Gosh thanks ever so much for the extra leg there Boatman!....ok I get the bit about the share issue to pay for the poo but not why the shareholders allowed it to happen.....

Have a gork at this...it's a cracka account of what's going on:

http://www.marketoracle.co.uk/Article24219.html

by Southern Dude | 12th Nov 10, 6:02pm 1289538132

This may be a great result.

It may allow the SFO and Securities Commission to unwind this asset from the Allied mess and be able to attcak Watson and Hotchin directly. Let's hope so as Watson and Hotchin should be bought back to NZ and charged and prosecuted for fraud.

Put these guys away and then attack Jock Hobbs and his Strategic Finance cronies and consultants.

by David George | 13th Nov 10, 4:15pm 1289618154

Good one Dude, why are these scumbags still free?

by Samal Bahay Kubo | 13th Nov 10, 9:12pm 1289635943

You've got to feel sorry for poor old HSBC - lured into loaning $Ms at the peak of the market (which none of the highly paid economists and market watchers at the bank could have predicted), and now being forced to get all of their money back in this public manner.

I'm shocked, shocked to find that gambling of this nature was going on here

Insp. Renault (Claude Rains) - Casablanca

by Horace the Grump | 14th Nov 10, 9:28am 1289680139

Oh come on Gareth! Do you understand basic maths?? Your headline is completely misleading.

$26m less $19m in debt is $7m, which is the value of the equity as at 30 June - which IS NOT THE SAME AS THE VALUE OF THE PROPERTY!!!!

Now that HSBC have issued a PLA notice on Allied and a sales campaign has failed it will be very interesting to see what the value really is, but nowhere in the announcement from Allied did they state a current value for the property.

Lets get the basics right here..

And another thing - lenders are issuing PLA;s like confetti at the moment and have been doing so for several months. Southern Dude is clearly living in a cave if he thinks this is anything other than normal business at the moment. THis is what happens in a recession. Get used to it.

by Gareth Vaughan | 17th Nov 10, 7:26am 1289932007

Agreed, not the greatest headline. Tweaked now. Thanks for the polite pointer H the G.

by Chairman Moa | 15th Nov 10, 9:00am 1289764829

Kind of wondering what type of illegal drugs did these Allied Farmer guys took when siging the Hanover deal? Or were they the same lots that worked for the NZ Dairy Board back in 80s when they became NZ only Lada Importer!

by Gummy Bear Hero | 15th Nov 10, 10:49am 1289771387

Two interacting theories I have is that Rob Alloway and the lads were desperate for a life-line . The existing business of Allied Farmers was in a deep blue funk . And they saw the Hanover property book ( all glittery , shiny baubles in Queenstown ) as a chance to be in the big league , to join the NZX50 group of larger companies . No more tea and pikelets in the Te Kuiti tea-rooms for the lads ; salmon sarnies and Pol Roger with the high-fliers of Queenstown , from now on .

The second part of my theory is that Rob and his Mob were awe struck by being in the presence of Eric Watson and Mark Hotchin . These guys had some form in NZ , amongst the jet-set , seen at all the right " do's " in Auckland . At the races . Fiji . Always with a bevy of beauties and Bollinger . Rob wanted a little of that mana ............... Kind of like , if you or me met our lifetime hero , we'd tremble at the knees alike teenage girls at a Justin Berber concert , if we really met Mr Bernard Hickey in the flesh .......................... Aha ha ha de haaaaaaaaaaaaaaaaaaaaaaaaaaaaa ! Sorry , Bernard . ....... I couldn't resist........ Naughty Gummy , you go too far ........ Ahem !