Allied Farmers chairman props up life-saving $600k Allied Farmers bond issue
Allied Farmers, which is slowly rebuilding from a disastrous takeover of the Hanover and United Finance loan books, has staved off insolvency after raising $600,000 in a bond issue, almost half of which was bought by interests associated with the chairman Gary Bluett.
The Hawera-based company's Allied Farmers Rural subsidiary raised the debt, with $250,000 coming from chairman Gary Bluett and an associated person, to fund a repayment plan with the Inland Revenue Department over a $4.2 million unpaid tax bill.
Bluett and his associated person "only agreed to participate as funders after the terms of the bonds were set and it became apparent there would be a shortfall in the amount AFRL could raise from the issue of the Bonds," according to an NZX waiver notice allowing the bond issue to take place without shareholder approval.
Separately, Allied Farmers has also reached a confidential settlement with a creditor who had called in a $540,000 loan, plus interest.
"Some of the proceeds of the bond issue have been used, together with a draw down on funds from an existing funding facility with its secured lender, Crown Asset Management, to fund the initial instalment of the repayment plan," Bluett said in a statement.
The firm announced the bond issue earlier this week, seeking at least $500,000 and as much as $1 million to keep itself alive.
The bonds, paying interest of 12 percent, rank behind Allied Farmers' debt to Crown Asset Management Ltd, the unit tasked with clawing back funds used in the government's deposit guarantee scheme, and are repayable on Aug. 31 2014.
The notes come with 58 options to buy shares at 2.7 cents apiece for every 10 bonds held, and can be exercised at any time within five years of their issue.
Earlier this week, Allied Farmers dodged a bullet when the Financial Markets Authority decided not to pursue likely breaches of the Securities Act by the directors of the firm's failed finance unit subsidiary, Allied Nationwide Finance.
The market watchdog sent a warning letter to the directors who were on the finance company's board at the time, including John Loughlin, Philip Luscombe, Susannah Staley, John Lewis Spencer, Paul MacFie, Gary Bluett and Richard Spiers. Only Bluett and Luscombe are on the board of Allied Farmers.
Allied Farmers is trying to rebuild after the disastrous acquisition of financial assets from Hanover and United Finance for $394 million in 2009. It has ring-fenced what's left of the assets in its Allied Farmers Investments unit, which had assets of $753,000 and liabilities of $1.21 million, as at June 30.
Last week, the company said it had sold its saleyard interests in Taranaki, Manawatu, Waikato and King Country to a joint venture subsidiary, NZ Farmers Livestock, for $3.6 million. Crown Asset Management took most of the proceeds to reduce the outstanding debt, with another $600,000 set aside for the tax department.
Allied Farmers would also be able to draw on up to $310,000 to meet outstanding commitments.
The shares were unchanged at 3 cents today, valuing the company at $2.7 million.