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John Loughlin - Source: ONE News -
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Shareholders in Taranaki based finance company Allied Farmers will vote on Tuesday on a proposal to buy up the assets of troubled finance company Hanover.
If successful, the $400 million takeover deal would see Hanover and United investors receive shares in Allied Farmers, with the expectation they could get around 78 cents for every dollar owed.
Business commentator Brian Gaynor believes the vote will get across the line.
"In the end I would expect the Allied Farmers shareholders to carry it. If not, I think then we're looking at Hanover being in receivership inevitably, probably sometime next year," he says.
The vote also has to be put to Hanover and United investors. At the moment, Gaynor says Hanover investors are directing much of their frustration at Hanover co-founder Mark Hotchin, but he says they will need to look beyond this and view the Allied deal as a long term solution.
"They've got the prospects of getting a lot of their money back, if not all of their money back, but they're not going to get it back instantly," he says.
Gaynor says Hanover and United investors will have to be patient. The worst thing they could do, he says, would be to start selling their Allied Farmers shares the day they get them, if the deal goes ahead.
If Hanover and United investors do not vote for the deal, they would have to wait another four years before the company would repay some of their money due to the five-year moratorium put in place last year.
Gaynor says other upsides to the deal include Allied being better able to utilise money to manage their book better, as being a debt for equity swap, Allied will not have any money to pay back.
He also says Allied will be able to attract better staff compared with Hanover.
"On balance, I think most of us who have looked at it think that there is probably a better opportunity by adopting the Allied Farmers deal rather than keeping it the way it is and going into receivership," he says.
The around 16,000 Hanover and United investors will vote on
whether to approve the deal next week.
