The future of Allied Farmers is in doubt after its accounts revealed it needs to sell property, collect money owed to it and reach an agreement with its rural creditors in order to survive as a going concern.
The rural services business, which acquired the assets of Hanover and United Finance in December 2009, revealed its position in half-year accounts filed to the NZX yesterday.
About 16,000 people with investments totalling in excess of $500 million have lost most of their money following the failure of Hanover and related companies, and the sale of assets to Allied Farmers.
The unaudited accounts show the company made a $9 million loss for the six months to December 2011, an improvement on the $20.6 million loss it made in the same prior period.
But a note in the accounts also reveals it faces significant challenges to continue operating.
"The cash flow forecasts of the Group indicate that in order for there to be a reasonable expectation that the group have adequate resources to continue operations for the foreseeable future there will need to be: Continued realisation of financial and property assets of Allied Farmers Investments; agreement of arrangements with rural creditors; collection of the balance of the Allied Farmers Rural Limited revolving credit facilities," the accounts state.
Allied Farmers Investments is a subsidiary of Allied which manages the assets acquired from Hanover and United Finance.
The subsidiary made a loss of $4.2 million in the six months to December 2011 after taking a $3.6 million hit on its Matarangi Beach Estates business.
The Coromandel property business was written down to a zero value in the latest accounts and placed into receivership in November 2010 by HSBC.
In a letter to investors, chairman Garry Bluett said Allied Farmers Investments had continued to make losses because several assets where large second mortgages were held had been sold by first mortgage holders resulting in further write-downs.
Bluett also said Allied Farmers Investments still had some loans that "may prove difficult to collect."
The company's accounts show its current liabilities were $32.5 million as of December 31 versus current assets of $24.5 million.
Its biggest liability is a $14.054 million loan from its former subsidiary Allied Nationwide Finance which is part of the agreement with the finance company following its receivership.
The largest part of the liability is a $12.784 million loan which expires on July 1. The second part of the liability is a $918,849 loan which is due to expire on Saturday (March 31).
Allied Farmers is paying 12 per cent interest on both loans and a portion of any property or loans it sells must be used to pay off the loans.
Its second largest liability is $11.88 million owed to trade creditors including $500,000 owed to Hanover Finance.
Allied also has a loan of $2.568 million from a bank and $2.758 million from another financial institution relating to the former Hanover and United Finance property assets.
The $2.758 million is due to be paid back in the next six months.
Bluett said Allied had managed to reduce its borrowings from $37 million in June last year to $19 million as of December 2001. This was largely as a result of its capital notes being converted to shares.
The $12.548 million in capital notes was due to be repaid to investors in November last year but the company decided to convert the notes to shares instead. A note in the accounts shows it failed to maintain the minimum capital level ratios required by its trusts deed for the notes during the six months to December 31.
However Bluett was upbeat on the company's position in his investor letter. "Allied Farmers continues to rely on the ongoing support from its secured lenders and creditors and is confident that this will continue. Allied Farmers anticipates further debt reduction before the end of this financial year."
Calls to Bluett and chief executive Steve Morrison were not returned yesterday. The company last traded at 3.9c on the NZX.