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Investors continue to shun Allied over trust deed breach

Investors have given Allied Farmers the thumbs down as Guardian Trust figures out what to do over Allied Nationwide’s trust deed breach.

Thursday, August 19th 2010, 10:59PM

by Paul McBeth

Allied Nationwide pulled its prospectus on Aug. 6 after Guardian Trust said its total liabilities exceeded 90% of total tangible assets, putting it in breach of the trust deed and gave it 14 days to remedy the situation. The trustee is expected to make an announcement on the situation today.

Since then, Allied Nationwide preference shares more than halved in value to 13 cents, and last traded on Aug. 17, while the yield on Allied Farmers capital notes has surged to 80% from 65% after its credit rating was downgraded. Shares in the parent company plunged by more than a third to 2.7 cents.

Standard & Poor's downgraded Allied Nationwide to CC, meaning it is highly vulnerable to default over the next five years, due to the covenant breach, which is the primary concern for the credit rating agency.

Once that has been achieved, S&P wants to see the finance company keep the support of its debenture holders, whose reinvestment rate fell as low as 29.3% in May, and secure repayments on its loan books.

Separately, it is understood that Allied Farmers will pump some of the Hanover assets into the finance company to bolster its balance sheet. The assets were ultimately valued at just $94.3 million, less than a quarter of the near $400 million number bandied about at the time of the debt-for-equity swap.


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

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