Allied Nationwide reaches out to parent as provisions mount
Embattled NZX-listed company Allied Farmers has provided extra capital to cover further losses on impaired loans at its subsidiary Allied Nationwide Finance.
In a market update released to the market this afternoon, Allied Farmers said it had provided an immediate increase in an existing credit support facility from $5 million to $10 million for ANF.
The increase follows a review of ANF’s loan provisioning prior to the release of its June 30 financial statements.
The review, subject to auditing, found ANF was likely to recognise total loan provisions of approximately $10.7 million for the second half.
ANF recently got a BB- rating from Standard & Poor’s and is therefore not eligible for the extended government retail deposit guarantee.
The company contributed an unaudited net loss after tax of $1.21 million for the six months to December.
ANF was expected to house some of the better performing loans and assets that Allied Farmers took over from the failed Hanover group of finance companies.
The worst were transferred to Allied Farmers Investments, a new company formed after the reverse takeover deal last December.
Last week Allied Farmers said the value of the Hanover acquired assets was now worth $124 million, compared to the $396 million value put on the assets when shareholders voted.
According to ANF’s most recent prospectus the finance company is experiencing 53% reinvestment rates, however that percentage is likely to fall once the existing deposit guarantee runs out in October.
The terms of the increase in the facility provided by Allied Farmers to ANF are subject to final approvals, which are in the process of being obtained, the company said in a statement.
[EDIT] NBR understands ANF has full recourse against Allied Farmers Rural under ongoing factoring arrangements as part of the sale of the rural business on June 30, 2009.
As at December 2009, the value of the debtors factored was $20.9 million.
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Comments and questions15
Hanover strikes again! How long has Allied got left? The due dilligance was good $396mm now $124mm what an achievement - against all the odds!
disaster waiting to happen. when will the rorting of these hanover investors end?
... but you cant polish a turd. Why on earth did Allied get involved... they could have let Hanover hit the wall and cherry pick the better assets with the receiver.... taking the whole book was going to be fraught with arrears issues as well as accurately valuing the assets upfront.
"NBR understands ANF has certain grounds for recourse against Allied Farmers and the Hanover acquired assets should its parent not be able to continue to support it" What grounds are they talking about? Does it mean "lets give back the Hanover loanbook, all the billions of shares, and turn the clock back to last year. Cetainly hope so, as that means the sp will be back to 45 cents...ALF and ANF are interlocked! One goes down and they both go down. Impaired loans means that the management oked dodgy loans and that they are not going to be paid back. Whare is the securitisation process? Who oked the loans in the first place? This is poor business!
I feel for the former Hanover investors who have been totally rorted but the CEO and board of Allied should be punished for this poor due diligence on Hanover.
Did they take high up front fees to take this deal on from Hotchin and Watson and ignore the fundamentals of the transaction.
They are absolute fools and should al be fired by the shareholders and also banned from any future directorships in financial institutions.
Give it another 6 months and write off another two-thirds -- that is, Hanover assets will be worth around $40mill. Allied Farmers, in its bid to shore up ANF, is just throwing good money after bad. Remove those Warner Bros. cartoon character directors, now.
Give it another 6 months and write off another two-thirds -- that is, Hanover assets will be worth around $40mill. Allied Farmers, in its bid to shore up ANF, is just throwing good money after bad. Remove those Warner Bros. cartoon character directors, now.
I think you are being a bit negative. Any money Allied Farmers can make from the hanover loan book is going to be good for them. Ok, they did a deal for $396 million and now its down to $124 million. They Knew that most of the loans were not going to happen so nothing has changed. $124 million going into ANF will make it a winner....surely you agree...makes it sound like a tui ad aye.
You are missing the very critical fact that bad press has a very negative affect on a company's fortunes.
What percentage of Allied Finance's investors are going to stay with a company which has no government guarantee past October 2010.
They may as well invest with SCF,which at least has an extended guarantee.
Regardless of the directors' percepion of value,the public has been given a very negative picture,and will vote with their feet.
I hold debenture stock with Allied Finance,but it matures well before the guarantee expires.
I predict a mass exodus.
Alloway & ALF are looking like Taranaki clods. Or am I missing something?
Please enlighten me.
"Alloway & ALF are looking like Taranaki clods. Or am I missing something? "
Nope, you got it in one. Alloway is a country bumpkin, who got put through the wringer by smart city slickers. AF's SP was shaky before he acquired Hanover's junk, and they're nigh on worthless, today.
Why be suprised? Time for the shareholders to act to salvage the last of the company assets. This company is destined to fail otherwise. The problem is the shareholder base is so thinly spread no one feels they can do anything. Shareholders need to do the following;
1. Sack the Board, the CEO, and the Head of Credit.
2. Sack the auditors.
3. Appoint a new fiscally minded board and management team.
4. Undertake an independent review of the Hanover transaction, and commence litigation against Hotchin, Watson, Hanover, Grant Samuels and the External Auditor.
5. If you shareholders don't act, just watch the bumbling ALF management blow what's left into dust.
6. The crunch will hit when they can't get enough deposits to fund the loan book, and they get a further credit downgrade. This is a certainty. The assets they took over are 95% impaired.
7. Alloway is out of his depth. Watch him resign to avoid the crash.
8. ALF will chew the balance of what's left in compliance and management costs. Exactly as they have been doing the last five years. This time on a bigger scale.
You poor poor shareholders. 6c a share looks a good result.
Dumb directors, dumb deal, dumb shareholders (or is that mislead?) thanks goodness I am not one of them
Two desperate bed fellows never have a successful relationship, it ends in tears, all too often early.
Allied desperate for scale, saw a loan book through rose coloured glasses and due dilligence was something that could be done later. It doesn't take a Rhodes scholar to understand that third in line securities get nothing in melt downs.
Handover investors desperate for cash, saw a tradeable equity, but forgot to determin who would want to buy their junk rated paper..
The end result: a tradeable equity with little or no value. Endless disappointments, with Eric and Mark free of any meaningful consequences. In fact they are home scott free, they have many assets tucked away in trusts upon which they can live the high life.
Deperation and Hope can not change a sours ear into a silk purse.
Another glorious outcome for the legislators and regulators. This is why the new FMA is so needed to stop the cowboys.
IF and its a big the FMA gets the muscle and uses it correctly they will punish and deter the cowboys whilst leaving the good guys and gals alone to do the business.
Its called good governance sadly an up to know unknown quantity by the legislators and regulators and of course the many cowboys.
Fact is NZ has more than its share of white collar crooks and always has. They have been sheltered and protected for years by the legislators regulators legal and accounting professions.
They have been allowed to ply their evil trade aided and abetted by the above who care not a damn for Mom and Pop investors.
I have heard and seen senior people laugh at the misfortune of Mom and Pops sneering at them with total contempt.
Its time to redress the balance.