Damien Grant: No sympathy for Hanover investors

Rob Alloway. Photo / Dean Purcell

Opinion

I agree with the much-maligned Mark Hotchin on the issue of Allied Farmers.

Allied Farmers needed cash when it fronted up to the Hanover investors in late 2009 and offered to swap its weak shares for Hanover debt.

The 2009 Allied Farmers' annual report wasn't pretty. The consolidated balance sheet showed net equity of $10 million. This included $21 million of good will and $7 million in "deferred tax", neither of which it could use to pay bills.

What the annual report did not show was that its finance company would fail. It was placed in receivership in August last year.

Whatever equity was left in the Hanover loan book was taken by Allied and used to plug a large hole in its balance sheet.

This is unfortunate for the Hanover investors but they are not deserving of sympathy. They were so determined to give Allied Farmers their money they voted to prevent former Shareholders Association head Bruce Sheppard from asking more than a single question. "They deserve all they get," Sheppard harrumphed at the time. We all know what they got.

Sheppard's was not the only voice raised in concern. Guardian Trust, the trustee for both Hanover and Allied's finance company, was blunt - investors would "cease to have any claim against the company, its residual assets or rights".

The Hanover investors are now crying foul and demanding taxpayers' money be spent chasing Hotchin and company. There are better calls on the public purse.

Allied Farmers did months of due diligence. It had lawyers and accountants pouring over the fewer than 70 loans on the book. It worked out the book was worth $396 million. It now thinks these assets were worth $84 million.

Somewhere Rob Alloway and his band of merry men lost more than $300 million. That works out to about $4 million a loan.

Hanover investors now own 95 per cent of the Allied Farmers stock. It beggars comprehension at how monstrously Allied misread the value of the Hanover book.

Hotchin's retort is Allied, desperate for liquidity, stripped the assets for quick cash at the expense of the long-term value of the book and he is now calling that the board be sacked. He, of all people, should know they will do no such thing.

The Hanover investors will do what they have done for the past three years: sit mutely and watch as another group of charming men in suits talk the pants off them.