Hanover Finance has served legal proceedings on Allied Farmers to pursue more than $5 million still outstanding as part of last December's debt for equity swap. In a brief statement NZX-listed Allied Farmers confirmed the legal action while reiterating it
Hanover Finance has served legal proceedings on Allied Farmers to pursue more than $5 million still outstanding as part of last December’s debt for equity swap.
In a brief statement NZX-listed Allied Farmers confirmed the legal action while reiterating its position that no further payment was due.
The legal action comes as Hanover and its former directors are subject to multiple investigations by the Securities Commission and the Serious Fraud Office.
Yesterday the Securities Commission was granted a High Court order allowing it to freeze the New Zealand assets of former Hanover director Mark Hotchin.
Earlier this year Allied Farmers said it had cancelled a contractual $5 million payment to Hanover Group due to what it claimed to be “serious breaches” of Hanover’s obligations under the agreement.
The agreement was entered into on November 17, 2009 – one month before Hanover investors approved the transaction. The $5 million related to Hanover’s costs of exiting the business including tax and contingent liabilities arising from pending litigation.
Allied claimed Hanover breached its obligations under the agreement, which included not disposing any finance assets without prior consent of Allied Farmers.
“These claims relate to a number of transactions where we have been unable to ascertain any sufficient commercial rationale or benefit to Hanover, including the release of personal guarantees and the sale of assets at what Allied considers to be less than market value,” Allied managing director Rob Alloway said in June.
He said it appeared Hanover entered into transactions in order to
generate
cash
required
to meet its
repayment
obligations
to investors
under
the moratorium
agreement.
Hanover is expected to argue it acted in accordance with the terms of the agreement and the personal guarantees were worthless.
Since the transaction Allied’s shares have lost more than three quarters of their value.
The Hanover assets, initially valued at $396 million, have been marked down to $94 million since the deal was approved.
