Allied Farmers books further impairments on Hanover assets
Allied Farmers reports an unaudited operating loss of $20.56 million for the six months to December, and additional impairments on assets acquired from Hanover and United Finance.
Allied Farmers reports an unaudited operating loss of $20.56 million for the six months to December, and additional impairments on assets acquired from Hanover and United Finance.
Allied Farmers has reported an unaudited operating loss of $20.56 million for the six months to December while reporting additional impairments of $12.62 million on the assets acquired from Hanover and United Finance.
The loss was worse than the $15.68 million operating loss for the same period a year ago and followed an unaudited net loss of $77.6 million for the year to June 2010.
Allied Farmers said the past six months had been “extremely challenging” for the group.
Aside from further impairments to the Hanover assets, the company booked a $1.06 million loss relating to discontinued financial services activities under Allied Nationwide Finance, which was placed into receivership last August.
Allied said the receivership of finance subsidiary Allied Nationwide Finance had placed considerable pressure on liquidity given it was a major funder of the debtors of the rural business.
“The loss of this finance source, together with the delay in the completion of the second phase of the proposed $9 million underwritten capital raising, meant that the Group had to significantly reduce its working capital,” Allied said in a statement.
A scheduled six monthly review of the carrying value of the assets held for resale within Allied Farmers Investments (as acquired from Hanover Finance & United Finance) had resulted in impairment losses on those assets of $12.62 million for the period, it said.
When Allied took over the ex Hanover loans and assets in a debt for equity swap in December 2009, the company ascribed a value of $396 million on the loan book.
It subsequently wrote down the value to $95 million. Allied did not clarify the latest carrying value of the assets but a further $12.62 million of impairments could see the portfolio worth just $84 million.
Allied Farmers has a share reset mechanism in place, which would see original Allied Farmers shareholders get issued more shares to compensate for any shortfall in the value of the assets at June this year.
Last month Hanover co-owner Mark Hotchin lashed out at Allied’s management of the assets and called for managing director Rob Alloway to be sacked.
Allied Farmers Investments has refused to pay a final $5 million outstanding to Hanover as part of transaction costs for the deal.
Allied claims there were “material breaches” of the contract transferring the ex-Hanover assets.
Hanover has commenced legal action expected to be heard at the end of May.
Plenty of debt still
Allied said the group was still carrying $13.29 million of debt transferred from Hanover.
“A strong focus in the second half will be to repay or restructure a large part of this debt.”
The company has already paid of a Westpac facility of $16.5 million relating to Allied’s existing debt.
It has also made $12.72 million of repayments made against debt obligations of properties transferred to Allied that had previously formed part of Hanover and United Finance’s “Shareholder Support Package”.
Allied has also converted its credit enhancement and related party loan arrangements with Allied Nationwide to a secured loan facility. This had an outstanding balance of $11.34 million as at December, 31, 2010 (30 June 2010: $12.32 million).
As part of the restructuring Allied Farmers Rural re-purchased its factored debtors from Allied Nationwide, partly financed by a secured loan from Allied Nationwide.
This had an outstanding balance of $7.76 million as at 31 December 2010 (30 June 2010: Debtor Factoring Facilities $17.15 million).
Allied Farmers Rural reported a net loss after tax of $1.86 million (2009: net loss after tax $0.90 million) for the period.
“The outlook in rural for the remainder of the year is positive with the business traditionally reporting good results in the second half year on the back of dairy herd sales,” Allied said.