Allied close to clearing debt with sale of loan

Rob Alloway. Photo / Hawkes Bay Today

Allied Farmers hopes to pay off its remaining $4.2 million debt to Westpac through the sale of one of its ex-Hanover loans.

The rural services company yesterday said it had reached a conditional agreement to sell the loan from its subsidiary Allied Farmers Investments to an undisclosed party.

Managing director Rob Alloway said the sale would allow it to pay back $1.65 million in senior debt and a further $2.5 million overdraft, allowing it to cut its ties to Westpac.

"There has been constraints placed on the business by having a senior lender. We have been quite keen to get out of that arrangement," he said.

Allied has been in talks with Westpac since June and will have paid back close to $17 million if the loan sale goes through.

The agreement is still subject to due diligence and legal documentation.

Alloway said it was just the "finer minor points" it needed to work through on the sale agreement before it went unconditional, expected to be towards the end of next week.

He would not say how much the buyer would pay for the loan but said after Westpac had been paid there was "quite a bit more" left for it to pay other short-term obligations.

Alloway said the company would now focus on restructuring the debt of the subsidiary businesses acquired from Hanover in the December debt for equity deal.

"We have been pretty tied up re-financing the balance sheet. But we want to look closely at the debt of the subsidiary companies to look at how to optimise that."

Alloway said it was too soon to say whether it would look for a new funder.

"It's a little bit early to say."

He did not rule out selling other non-core assets of the business.

"Everything that is non-core we will be looking to realise."

Allied shares rose 0.3c on the sale news to 2.9c after drifting lower in recent weeks as investors await news on the company's audited accounts.

Allied filed late unaudited accounts for the year to June 30 on September 10 showing a loss of $77.6 million. Today is the last day it can file the audited accounts before facing suspension from the stock exchange.

Alloway said Allied was on track to release the audited financial results and was not expecting any material changes.