IRD files to liquidate Allied Farmer's rural unit over $4.2M tax bill

Monday 27th May 2013

Allied Farmers, which kept itself alive in March through a fire sale of toxic loans, is back in the firing line after its rural unit was today served with a liquidation notice by the Inland Revenue Department over a $4.2 million tax bill.

The Hawera-based company was today served with the notice, 26 days after it was filed with the High Court, it said in a statement. Allied Farmers' rural subsidiary received a statutory demand from the tax department on Feb. 25 and has been in discussions with the IRD since then.

The court filing "is surprising given that AFRL (Allied Farmers Rural) understands the statutory demand had expired" by May 1, it said. "AFRL will be seeking legal advice to clarify the matter, but in the meantime continues its discussions with IRD and remains hopeful of achieving a settlement with the IRD before the hearing which is set down for 23 July 2013."

The company survived a call on debt from an unnamed creditor earlier this year after it sold various loan assets with no book value for $100,000 upfront and potential for a further $500,000. It later sold its Taranaki real estate unit for $472,500 last month

Allied Farmers Rural held assets worth $7.72 million and liabilities of $9.44 million as at Dec. 31, according to the company's first-half report. The division reported a first-half loss of $800,000, down from a loss of $1.5 million a year earlier and said it expects to be profitable in the second half, when it gets most of its earnings.

In December 2011, Allied Farmers Rural sold its livestock business, with $280,000 of assets, for shares in a wholly owned subsidiary, New Zealand Farmers Livestock.

It then sold part of that company to a firm owned by employees of Allied Farmers Rural, and issued more shares to Allied Farmers Rural's livestock agents, leaving it with 68 percent of the new company. Those transactions were settled on a cash basis with a valuation of the livestock business at $7.5 million.

Allied Farmers is trying to rebuild itself after its disastrous acquisition of financial assets from Hanover and United Finance for $394 million in 2009. It has ring-fenced what's left of the assets in its Allied Farmers Investments unit, which had assets of $25.7 million, according to its first-half accounts.

The shares were unchanged at 2.5 cents today, valuing Allied Farmers at just $2.27 million.

BusinessDesk.co.nz

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