Rates round-up: October 15

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Court case delays Auckland Council bond offer; Infratil to issue new bonds, replace old ones; Double-whammy for Allied Farmers

Monday, October 15th 2012, 6:00AM

by Niko Kloeten

A court judgment on leaky building liability has caused the Auckland Council to delay its first bond offer since its amalgamation into the ‘Super City’ in 2010.

Auckland Council was seeking up to $175 million (including up to $50 million in oversubscriptions) through a six-year, fixed-rate, secured retail bond offer, which opened last week and was due to close on Friday.

However, following a Supreme Court ruling that leaves councils potentially liable for leaky commercial buildings as well as residential ones, Auckland Council said it has decided to defer its bond offer while it considers the implications of the decision.

"It is expected that the relaunched offer will be made in the near-term," Auckland Council said.

"This decision does not impact Council's obligations under its existing bond issuances or the security over Council's rates that supports repayment of those bonds. Council's ability to comply with these obligations is not expected to be adversely affected."

Infratil to issue new bonds, replace old ones

Listed investment firm Infratil is planning a new bond issue of $75 million and is also looking to replace up to $57.4 million of existing bonds.

Infratil is offering an annual interest of 6.85% per year on its issue of unsecured, unsubordinated six-year bonds, which won’t have a credit rating.

It is looking to raise $25 million on its offer of new infrastructure bonds, while allowing for up to $50 million of oversubscriptions.

Infratil is also giving holders of its $57.4 million worth of infrastructure bonds maturing on November 15 the chance to exchange some, or all, of their bonds for the new ones.

The offer is due to open this Wednesday, October 17.

Double-whammy for Allied Farmers

Only hours after filing annual accounts in which its auditor PwC refused to give an opinion, Allied Farmers discovered a lender had called in a $500,000 loan.

Allied said it had asked for more time to repay the loan, which was scheduled to be repaid from an asset sale in November.

"Allied has requested an extension of time from the lender to coincide with the realisation of the underlying asset. This seems a sensible solution for both the lender and borrower," chairman Garry Bluett said.

"In the event an extension is not granted that would result in an enforceable event of default under ALF’s secured loan facility."

It came on the same day PwC placed a 'Disclaimer of Opinion' in Allied’s annual report on the basis there wasn’t enough evidence to support some of the assumptions in the report.

Allied reported a full-year loss to $14.1 million in the year ended June 30, down from $40.98 million a year earlier, as it wrote down the value of the Hanover and United loan books even further.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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