Rob Alloway (L) and Mark Hotchin facing Hanover investors yesterday. Photo / Paul Estcourt
The scale of Allied Farmers' headache became clear as Hanover investors approved a debt-for-equity deal yesterday.
A 45-page notice of meeting and explanatory memorandum disclosed how Hanover's five biggest loans were to properties with big problems.
Three are at the mercy of Queenstown's fickle property market and are projects either
hardly started, some way from finishing or with slow sales.
The two biggest loans have the worst problems: Hanover gave $72.4 million to Dave Henderson's failed Five Mile and its single biggest loan was $88.7 million to Nigel McKenna's troubled Kawarau Falls, which continues in spite of receivers KordaMentha being appointed.
Those loans will now become Allied's problem but it has emphasised it will be in no hurry to quit properties at low sums.
All five projects have difficulties. Although Hanover got $11 millionfor part of Five Mile from Auckland developer Tony Gapes, moneywas left in to sweeten that deal.
Hanover stressed the grim outlook.
"Each of these developments will take a number of years before there will be significant realisations or an outright sale ... The stage of development and in some cases complexities surrounding other securities mean that under a forced sale there would be a significant loss."
Hanover co-owner Mark Hotchin said Allied was in a much stronger position because it had a business and plans.
"We are in a shrinking business just doing collections. Allied Farmers is in a different position. They don't have to collect the same as we do on a daily, weekly, monthly basis," he said.
"These guys don't because they have an operating business. Obviously no one wants to be here, least of all you and certainly not me.
"We never thought we would be in this position."
* Hanover's largest loans
Five Mile, Queenstown $72.4m
Kawerau Falls, Queenstown $88.7m
Jacks Pt, Queenstown $44.9m
Kinloch Golf Course, Taupo $24m
Industrial land, Silverdale $23.1m
TOTAL $253.1m
Source: Hanover explanatory memorandum and notices of meeting
