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Perpetual flags its concerns over Allied/Hanover deal

United Finance trustee Perpetual Trust has pegged Allied Farmers' share issue as a potential concern for investors in the $400 million offer to buy Hanover Finance's loan books.

Friday, December 4th 2009, 7:23PM 6 Comments

In a letter to investors, Perpetual chief executive Louse Edwards said the offer of shares as opposed to cash could be a concern for investors, as there is "no certainty as to what price the Allied Farmers' share will trade." The letter mapped out the options for investors, saying the three options under consideration are that the proposal is accepted by investors, that the offer is turned down and the current debt restructuring continues, and that the offer is voted against and Hanover and its subsidiaries go into receivership.

"This proposed transaction is a significant departure from what you initially put your money into and a shift away from the debt restructuring plan investors voted in favour of in December last year," Edwards said in her letter to investors. "If investors seek to sell Allied Farmers' shares in the short term they will very likely receive a materially lower sum - and from which sum they will be required to pay the costs of that sale such as brokerage - primarily because there are likely to be more sellers of the shares than buyers."

Hanover Finance's independent directors are recommending investors accept the $400 million all-stock takeover which would see debenture and note holders control more than 90% of the new-look Allied Farmers. Allied's chief executive John Loughlin told sharebrokers he is confident his company can realise more value from the Hanover loan book than the failed finance company can under its moratorium obligation, as it can take a longer-term view in squeezing the cash out of Hanover's debtors.

Perpetual also earmarked the financial position of Allied Farmers as an area of concern, saying the prospectus did not take into account the company's trading results since June 30, and that the asset valuation had not been independently scrutinised. The letter also said no adjustments had been made for the fair value of assets, nor any for goodwill which may be written down at some stage in the future.

Edwards said in a statement that Hanover's directors doubted the company would be able to meet the full repayment investors agreed to under its debt repayment plan last year after a significant write down in asset values, and that the timing of any recovery was also uncertain.

Last month, Hanover posted a $102 million loss and confirmed its best-case scenario would see investors receive about 70 cents in the dollar.

 

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Comments from our readers

On 5 December 2009 at 9:24 am kate said:
if there was any value left in the shares surely Hanover would have taken that- so what is in it for the shareholders
On 5 December 2009 at 11:19 am ian cotching said:
If Hanover/United investors believe they are getting 72c shares from Allied then they are in cuckoo land. Why is no-one using the Geneva Finance example to show people what is going to happen ? Somebody wants to buy 750,000 at 1c each - the only offer on the exchange ! The last sale was 9c and the company "gave" the shares to their debenture holders at 100c. Something very similar will happen to the Allied shares. Let Hanover go into receivership because you won't lose any more money and will get what is there back a lot more quickly.
On 5 December 2009 at 2:05 pm Ron Palmer said:
Amazing, Perpetual Trust has stated the obvious. If it had done the job it was paid for before Hanover and United got into trouble most investors would not have put money into those two NBDT. Now it is stating the obvious. An obvious that can be understood by dimwits. Nonetheless, all investing has degrees of risk attached. If Hanover and United are put into receivership there will be very little left for the investors after the recievers have fire sales of property and get very Fat fees. Receivers are almost as greedy as Watson and Hotchins. Logic should really tell you to take your chances with Allied and wait for the economy to become bouyant again and the share price will rise well over the $ per share. Put your well placed vindictive and hatred attitude against Watson & Hotchins to the side. It wont return your money or cause them to loose theirs. Most of the journalists and the likes of Sheppard do not have their money at stake so they talk cheap, with nothing to loose and very little sense.
On 5 December 2009 at 3:57 pm Benno said:
Don’t believe that you will get 72c a share return from Allied, that’s more than a dream.
Many weak companies have gone bust lately something very similar will most probably happen to Allied Farmers it is hasn’t happened already.
Let Hanover Finance go into receivership which would be more quickly and end this frustrating battle with less pain – the sooner the better.
It’s better to receive a small part of our investments for sure than to fight another long battle with Allied Farmers and lose everything.
On 5 December 2009 at 5:30 pm Graeme Harper said:
Allied Farmer's shares have already declined in value over the last 3 weeks. If the shares deal is accepted the Hanover debenture holders will control about 95%
of Allied Farmers and the share price will be so diluted as to be nearly worthless with so many shares on the market and too many sellers. Go for receiver ship of Hanover.
On 6 December 2009 at 11:30 am Gail said:
Allied's offer is not equivalent to debenture stock. We have legal entitlement to the real assets owned by anover. With Allied, we'd be getting stocks that will be of little or no value in the short to mid-term. If allied goes bankrupt or into receivership... you will lose everything.
Commenting is closed

 

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