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.