-
Source: ONE News -
Watch Video
-
Related
Hanover Finance debenture holders will get an average of 78 cents for every dollar owed them if they take up an offer from Allied Farmers.
Allied Farmers on Wednesday announced it had signed an agreement with Hanover Finance and Hanover subsidiary United Finance which would see the rural services and finance business company buying the finance assets of Hanover and United in a deal worth about $400 million.
If approved, Hanover and United investors would receive Allied Farmers ordinary shares issued at market value, and Allied Farmers would acquire the finance assets of Hanover and United.
The deal is subject to conditions and would require 50% approval from Allied Farmers shareholders and 75% approval from Hanover and United investors.
Allied Farmers chairman John Loughlin told a media conference on Wednesday morning that Hanover Finance secured deposit holders would get about 78 cents per dollar of original principal owed them based on market value of Allied Farmers shares.
This was confirmed by Hanover Finance chairman David Henry in a statement.
He said United Finance secured deposit holders would get 90 cents for every dollar of original principal owed, which was inclusive of payments of six cents already made under the debt restructuring plan in place since December last year.
He said Hanover Finance subordinated note holders and Hanover capital bond holders would receive 30 cents in value.
Henry said independent experts Grant Samuel had been commissioned by Hanover to provide a report for investors on the merits of the Allied Farmers proposal, after which the directors would make recommendations to investors about the proposal.
"At that time we will communicate fully to investors prior to the vote required from them for the Allied Farmers proposal to be approved."
Hanover last week said the worsening property development market meant it expected Hanover secured depositors to receive about 70 cents in the dollar, United Finance investors 90 cents and it could not forecast any repayment for subordinated note and bond holders.
What the deal will mean
Loughlin said the deal offered Hanover Finance depositors some liquidity which they did not have at present.
Allied Farmers said that, helped by external advisers, it had carried out detailed due diligence on the Hanover and United assets and built up an understanding of the risk and return profile associated with them.
The intention was that a large proportion of the performing assets would be transferred to Allied Nationwide Finance, increasing the size of the balance sheet and improving capital adequacy.
A new subsidiary of Allied Farmers would be established for holding and managing difficult assets. That subsidiary would be led by Allied Farmers managing director Rob Alloway until a permanent appointment was made.
Loughlin said the benefits for Allied Farmers' finance subsidiary Allied Nationwide Finance would be immediate, with an anticipated increase in credit ratings and a consequent drop in costs.
"The effect is that Allied Nationwide Finance Ltd, and indeed Allied Farmers as the parent company, receive a significant injection of equity into their balance sheets and an elevation in size which will enable both entities to look at further acquisitions."
Loughlin estimated about 20% of the Hanover assets were performing, while the balance were non-performing.
He said the "challenging" assets included the Five Mile and Kawarau Falls developments near Queenstown. He said it was logical to look at selling its Five Mile interests, but that the situation for Kawarau Falls was not so clear.
He said that if the deal went ahead it would possibly turn Allied Farmers into an NZX50 company.
Loughlin said they looked to a number of struggling finance companies through this process, and said that if this deal proved successful, a similar deal with another company could be possible in the future.
For the year to June, Allied Farmers reported a bottom line loss of $33.3 million, after a $20.5 million writedown on the value of Allied Nationwide Finance.
The loss compared to a $2.37 million profit in the same period last year.
The pre-tax loss of $5.7 million compared to a $8.2 million profit last year.
Allied Farmers shares lifted 2 cents to 35 cents following the announcement, after a trading halt was lifted.
