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Allied Nationwide rating cut deeper due to covenant breach: S&P

Allied Nationwide Finance was always facing a credit rating downgrade, though its covenant breach got it deeper into dangerous territory.

Monday, August 16th 2010, 8:27PM

by Paul McBeth

Standard & Poor's director financial institutions Peter Sikora said Allied Nationwide's weak cash inflows and slower than expected asset sales and recapitalisation efforts would have caused its credit rating to be cut.

"The rating would've been lowered in any case, stemming from the cash balance reduction and lower-than-anticipated reinvestment rates," Sikora said in a podcast.

Sikora said the firm needs to remedy its trust breach first and foremost, and said he understands the parent company, Allied Farmers, was looking to inject "a small level of new capital."

To restore its credit rating, it needs repayments on its loan book to come in on schedule, and retain support from debenture holders.

Allied Nationwide had its rating cut to CC from B last week, meaning it is highly vulnerable to defaulting on a repayment, and had to withdraw its prospectus after its trustee, Guardian Trust, said it was in breach of its deed.

Separately, Allied Farmers slashed the value of its property and loan book acquired from Hanover Finance and United Finance last year to just $94.3 million. The assets were valued at nearly $400 million at the time of the debt-for-equity swap.

 

Paul is a staff writer for Good Returns based in Wellington.

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