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Hanover Finance's loan to Fijian resort Vatulele has proved disastrous for Allied Farmers with ANZ Bank calling in the receivers.
The multimillion-dollar loan on the resort, a popular winter destination for New Zealanders and Australians, has been in default for more than two years. ANZ, which lent to the project, pulled the plug last week.
An Allied Farmers subsidiary is the second secured lender after ANZ.
The resort is continuing to operate and advertise but Allied Farmers, which inherited the loan when it bought the Hanover and United assets, might now have to write off more than $10 million.
Last year, Allied was fighting to recover money from Fiji. John Loughlin, then chairman, and Rob Alloway, then managing director, said they had a number of causes of actions and demands for payment against developers for loans on properties there.
Hanover also loaned money to Fijian resort project Pacific Point, which had hardly started before it failed.
"We are using all means possible to make recovery from delinquent borrowers who seem determined to hide from their financial responsibilities," Loughlin and Alloway said.
Last week, Alloway left the company even though he was not due to go until next Thursday.
Two years ago, Alloway addressed investors alongside Hanover co-founder Mark Hotchin, saying their backing was likely to propel Allied into the NZX-50 share index. But Allied's fortunes have suffered. From trading at $2.25 in 2007, it now has a market capitalisation of just $18.3 million and is trading for less than a cent, down from around 15c when it did the deal with Hanover and United.
Vatulele, southwest of the main island, is a 31sq km island whose only other inhabitants live in four villages on the northern side.
Allied said on Friday: "Allied Farmers advises that at this time it is not possible to fully understand any further impact on the carrying value of the loan arising from the appointment of receivers and managers until the completion of the valuation currently underway for the purposes of Allied Farmers' year-end financial reporting, and/or the completion of any sales process that the receivers and managers may chose to pursue."
Allied's loan is secured by a second mortgage over the Vatulele Island Resort and development land.