Allied Farmers puts off capital raising
Troubled NZX-listed Allied Farmers has postponed plans to raise capital while talks continue with its finance company trustee about a disputed breach of its trust deed finance ratios.
Allied Farmers, which last December took over the assets and loans of the Hanover group of finance companies, had been seeking to raise $19.3 million through a share placement and rights issue.
However, chairman John Loughlin said today the company had delayed the record date for the capital raising until its subsidiary Allied Nationwide Finance “provides reassurance to satisfy the concerns of its trustee."
Last week Allied Nationwide received notice from Guardian Trust that it was in breach of one of the financial ratios and had 14 days to remedy the situation.
“Our preference is for the prospectus to disclose the very latest information, and with our Trustee having some questions over our finance subsidiary we feel it is prudent to delay the prospectus,” Mr Loughlin said in a statement to the NZX.
“The Trustee is being cautious and we just need to work with them to ensure they have the level of comfort they need to allow Allied Nationwide’s current prospectus to be reinstated, therefore better positioning Allied Farmers to go ahead with the prospectus for the planned capital raising.”
Allied Nationwide is covered by the Crown deposit guarantee scheme until October 11. It must also increase its non-deposit funding ahead of new capital adequacy rules scheduled to come into force later this year.
Allied Nationwide is due to release its results shortly. The company reported a net group loss of $6.4 million for the year ended June 30, 2009.
Parent company Allied Farmers has already extended credit to its finance subsidiary and may have to pump more cash in depending on the state of Allied Nationwide’s loan book.
Allied Farmers recently negotiated a further extension on its banking arrangements with Westpac as it continued to work on several restructuring initiatives. Allied owes Westpac a total of $19 million.
Mr Loughlin said the issue around Allied Nationwide was its future liquidity position and how it would be funded after the Government’s guarantee expires on October 11.
“The finance business has been self funding for the last three years or so. While our current audit is yet to be signed off, our numbers show that continues to be the case, and we are confident we will continue to have or obtain sufficient funds necessary to pay back debenture holders.”
More capital needed
It was possible that Allied Farmers would have to provide additional capital to Allied nationwide as part of a solution to the trustee concerns, he said.
That could involve the transfer of some of the assets acquired from Hanover Finance and United Finance, “in line with what we told investors leading in to the purchase of those assets in December 2009.”
Allied's main concern was paying debenture holders on time, he said.
Mr Loughlin said he expected that the capital raising would progress as planned when the company had resolved the Trustee’s concerns, and noted that constructive discussions were occurring with the underwriters in relation to the delay.
“I’m reluctant to put any time frame on when we will progress the capital raising but I’m expecting just a short delay.”