Outlook bleak for Allied Farmers
Allied Farmers (ALF) is unlikely to be able to repay $7.5 million owed its former finance company by the July 1 due date but is hoping its improving rural business will allow it to avoid receivership.
Monday, April 11th 2011, 8:52PM
by Jenny Ruth
ALF says the receivers of the finance company, Allied Nationwide Finance (ANF), are reserving their position and considering their options.
Kerry Downey of McGrathNicol, ANF receiver along with partner Andrew Grenfell, wouldn't comment.
ALF managing director Rob Alloway says ANF's receivers could elect to put ALF into receivership but that isn't a cheap option, he says.
"The security position is across all the assets," including ALF's rural business which is currently generating solid revenue and growth in some areas, Alloway says. "Receivership would undoubtedly destroy value within the rural business."
Former Hanover debenture holders now own about 98% of ALF following their agreement in late 2009 to a debt-for-equity swap which saw ALF take over Hanover's assets.
ALF shares last traded at 1.4 cents compared with 10 cents on the day the Hanover investors were issued their shares.
Alloway says ALF will be able to pay "somewhere between zero and $7.5 million, but it won't be $7.5 million we're indicating at the moment. It will be reduced, there's no question, and there will be less than $7.5 million owing."
ALF is blaming "challenging conditions driven by market saturation of finance company assets." It had expected to repay the loan through asset sales.
If ALF can't repay that debt on time, it will be its third default under funding arrangements with ANF, which went into receivership in August last year.
A second loan of $11.7 million from ANF falls due on July 1, 2012.
The first default was in November last year when Matarangi Beach Estates, loans to which ALF acquired from Hanover, went into receivership. The second was a dispute over a guarantee which ALF revealed last week.
"Although the forecast realisations required to fully repay ANF have not been achieved, we have had better success in relation to the sale of properties we own at Jacks' Point and Clearwater," Alloway says.
ALF has retired $2.9 million of debt owed by those properties to lenders ranking ahead of the finance company, reducing the total owed to $10.4 million. ALF expects sales contracts due to settle before June 30 will reduce debt by about a further $4.7 million.
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