New lifeline for struggling Allied Farmers

Allied Farmers has been trying to rebuild after the disastrous acquisition of financial assets from Hanover and United Finance in 2009.

A subsidiary of Allied Farmers wants to raise up to a million dollars to help it repay money to the Inland Revenue Department.

Allied Farmers Rural is facing a liquidation hearing from the IRD over a $4.2 million bill and says a bond issue would allow it to pay the initial instalment of a proposed repayment with the tax man.

The repayment plan has yet to be agreed to by the tax department but Allied said the liquidation hearing would not go ahead if the bond money was raised.

The rest of the money raised would be used for working capital.

Allied Farmers is also in negotiations to reach a settlement agreement with a creditor which has demanded repayment of $540,000.

That settlement would also be conditional on Allied Farmers Rural reaching a repayment plan agreement with the IRD, the company said in a statement today.

Allied Farmers Rural hopes to raise a minimum of $500,000 at $1 per bond paying interest of 12 per cent per annum. The bond would be repayable on August 31 2014.

Investors in the bonds would also get the option to acquire shares with 58 share options for every 10 bonds bought.

The bonds would rank behind Crown Asset Management and would have general security over the assets of Allied Farmers and its subsidiaries other than New Zealand Farmers Livestock.

Allied Farmers has been trying to rebuild after the disastrous acquisition of financial assets from Hanover and United Finance for $394 million in 2009.

Last month the company declared a loss of $4.4 million for the year to June 30. Its shares last traded at 0.03c.