Value of Hanover, United assets more than halves

Value of Hanover, United assets more than halves for Allied under IFRS spotlight

March 1 (BusinessWire) – Allied Farmers Ltd. stumped up shares valued at about $400 million for the financial assets of Hanover Finance and United Finance. The assets are worth less than half that amount now, under the company’s new valuation.

Announcing a $15.7 million first-half loss today, from a year-earlier loss of $3.9 million, Allied said the value of the assets it acquired have slumped to $175.5 million under NZ IFRS reporting, from a gross realisation value of $396 million at the time the deal was announced last year.

“The Allied Farmers board, with guidance from external advisors, has undertaken a provisional fair value assessment on what we still consider to be a challenging group of assets,” chairman John Loughlin and managing director Rob Alloway said in a joint statement.

“Since settlement of the transaction, a number of positions have softened further than expected,” they said. “While we are confident a number of realizations can be achieved in the medium term, there is uncertainty attached to some positions.”

Shares of Allied slipped 2% to 10 cents, having fluctuated in the past two weeks amid uncertainty of their inclusion in the NZX 50 Index. The company allocated about 1.9 billion new shares to Hanover and United investors at 20.69 cents apiece, handing them control of the vastly enlarged company.

According to Allied’s statement today, the value of the assets was decreased by a net $20.7 million before settlement of the deal. A further IFRS interest adjustment carved a further $55.95 million off the value.

A further reduction of $27.86 million was applied to property assets held for resale, $16.8 million lopped off investments and $99.3 million sliced off finance loans, amid uncertainties around stage 1 of the Kawerau Falls Station project in Queenstown.

“This in turn has affected prospects for further development on Kawarau Falls Station stages 2 and 3 where the company has major exposures,” it said.

The Hanover and United assets are now held in a subsidiary called Allied Farmers Investments, which has already begun litigation against a number of borrowers and called up guarantees.

Revenue in the first half was $53.7 million, down from $66.9 million a year earlier.

Separately today, Standard & Poor’s assigned a BB- long-term credit rating to the company's Allied Nationwide Finance unit. The outlook is negative.

“The negative outlook reflects our view that downside risks to the rating will likely prevail in 2010,” S&P credit analyst Gavin Gunning said.

(BusinessWire)

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