Allied Farmers in dispute with asset buyer
Allied Farmers says the sale of former Hanover receivables did not go through as expected by March 31 and it is now in dispute with the buyer of a loan. [UPDATED with CEO comments]
Allied Farmers says the sale of former Hanover receivables did not go through as expected by March 31 and it is now in dispute with the buyer of a loan.
The sale agreement was entered into by subsidiary Allied Farmers Investments last September.
The purchaser of the receivable has written to Allied Farmers regarding the payment delay, alleging that Allied Farmers was in default under a $7 million guarantee in respect of repayment of the loan.
Allied Farmers did not accept that it is bound by a guarantee as alleged, and was taking legal advice.
This appears to be in contrast to note 17 to the half year report, which states:
“The parent company has guaranteed to the purchaser of a loan from our asset management services division that $7 million of proceeds will be collected from the loan.
“Any forecast shortfall in proceeds the purchaser may claim under the guarantee is provided for in the financial statements and charged to the income statement.”
Managing director Rob Alloway told NBR the agreement was actually a ‘best endeavours approach’ to collection of the money rather than a straight up guarantee.
“It was a loan asset and we’ve actually continued to assist with the co-ordination and collection but we’re claiming it was a best endeavours approach.”
He said the loan was made to a company in receivership and monies had since been collected but receipt of the proceeds had simply been delayed until the end of the receivership process.
He would not disclose the identity of the borrower or the purchaser of the loan.
“Even if Allied Farmers was in default, which we do not accept is the case, we would be surprised if any enforcement action was taken. This is because the underlying asset securing the loan has already been sold and the cash proceeds are on deposit merely awaiting distribution pending completion of a receivership, which is expected to occur before year-end.”
There is no impact on the carrying value of the loan asset.
NZPA and NBR staff
Wed, 06 Apr 2011
Wed, 06 Apr 2011
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Allied Farmers in dispute with asset buyer
13669