Allied looks for ways to back into guarantee scheme

Allied Nationwide Finance is working with its parent, Allied Farmers, towards boosting the finance company's fortunes after it received a BB- credit rating from Standard & Poor's earlier this week.

Chief executive John Mallon said they have a range of options on how to best boost the company's capital after this was flagged by S&P in its report.  This will include the introduction of the better quality assets from the Hanover and United loan books that were bought by Allied Farmers in December, in exchange for capital.

"There are a number of loans that we can take, but we have agreed limits with our trustee on how much exposure we can have to one borrower," Mallon said. "We can't take any single loan that's over $10 million."

Cash might also be a component of any capital injection into Allied Nationwide by the parent, though it is already enjoying a steady cash flow and is holding significant cash in the bank. While the company wants to boost its credit rating to a BB, which would grant it access to the government's extended guarantee scheme beyond October 2010, a key focus is preparing for the central bank's capital ratio requirements that will come into effect in September.