Allied admits Hanover mistakes

Allied Farmers managing director Rob Alloway. Photo / Dean Purcell

Allied Farmers managing director Rob Alloway says it may not have done the deal to buy Hanover's assets if it had received better information from external advisers.

Alloway yesterday faced about 100 investors at its first annual general meeting in Hawera since doing the debt for equity swap with Hanover last December.

The company came under fire for not undertaking more research on the Hanover deal and the fall in the value of the assets since then.

Alloway said it had been another very tough year for the company and acknowledged mistakes had been made.

Asked if he would have done the Hanover deal differently, Alloway said: "I think if it had been presented to us in a different way. If the auditors and valuers' report had said something different then the deal might not have been done. But it is done now."

Alloway said Allied had to look forward and focus on what it did have.

The company planned to target reducing its debt levels to less than $30 million by June and build on its rural business which had performed in line with expectations over the past year.

Alloway said the future for Allied in returning any more value to its shareholders lay in growing its rural business.

"It is critical to our survival."

The company was also focused on selling more of its non-core assets in the Hanover loan book. "A number of those are dependent on court actions. But that is well under control now."

Allied's presentation also included a breakdown of Hanover's largest loan assets at the time of the deal.

The largest of the loans was to Queenstown development company Peninsula Road stage two, to which Hanover and United Finance lent a combined $96 million - all of which has since been written off. Alloway declined to give details of the other loans.

Tim Rainey, the legal representative for the Hanover Action Group representing around 2500 to 3000 investors, described the meeting as sombre. "There was an underlying anger but also a growing resignation by investors that their money had been lost."

But he said he came out of it feeling more positive than when he went in.

"I left a little bit more positive about the future of Allied."

Rainey said there had a been a number of concerns about the company following on from its annual report where the auditors had questioned its viability as a going concern.

"Those concerns have receded a little bit. It appears the company may well trade its way out of the current financial difficulties."

But he said he remained concerned about the bonus share deal that pre-existing shareholders to the Hanover deal would benefit from next June because of the fall in asset values.

"That is going to see another massive issue of shares which is going to be very dilutive."

Rainey said Hanover investors had been aware of the condition when the deal was put through but the implications may not have been fully explained.

Allied's board also announced Alloway would remain in charge of the company for another six months.

Alloway resigned from the executive in September and was to have stepped down from his managing director role this month.

The board said it had asked Alloway to remain in the position until the end of his contract on June 30 next year.

Rainey said Alloway's decision to stay on as managing director was some positive news. "He has been there picking up the pieces. It's easy to sit on the sidelines and criticise some of the calls being made. But at least he is making decisions. That announcement struck me as one good bit of news."

Allied shares closed flat on 2.3c.

BIG LOANS

Hanover & United Finance's largest loan assets:
* Peninsula Road Stage 2: $74m
* Peninsula Road Stage 2: $22m
* Melview (Kawarau Falls) Stage 1: $20m
* Honk: $14m
* Kingscliffe: $12m
* Ocean Pacific Resorts: $10m
* Noosa Sanctuary: $9m
* MAC Reeves - MAC property finance: $8m
* MAC Reeves - Brockton: $5m
* Turn & Wave: $5m

These are the amounts estimated to be written off.