Allied Farmers seeks $1M in bond issue to pay tax, avoid wind-up

Allied Farmers, which is recovering from its disastrous takeover of the Hanover and United Finance loan books, wants to raise up to $1 million in a bond issue to settle an outstanding tax bill and stave off threatened liquidation proceedings.

The Hawera-based company's Allied Farmers Rural subsidiary will seek at least $500,000 from a bond issue to fund a proposed repayment plan with the Inland Revenue Department, and keep the balance for working capital.

The bonds will rank behind Allied Farmers' debt to Crown Asset Management Ltd, the unit tasked with clawing back funds used in the deposit guarantee scheme, and will be issued at $1 apiece, repayable on Aug. 31 2014 at 12 percent. The notes will also come with 58 options to buy shares for every 10 bonds held.

After the close of trading on Friday, Allied Farmers said it had sold its saleyard interests in Taranaki, Manawatu, Waikato and King Country to a joint venture subsidiary, NZ Farmers Livestock, for $3.6 million. Crown Asset Management took most of the proceeds to reduce the outstanding debt, with another $600,000 set aside for the tax department.

Allied Farmers would also be able to draw on up to $310,000 to meet outstanding commitments.

The company is also in talks with another secured creditor owed $540,000, which has made a call on its debt.

Allied Farmers is trying to rebuild after the 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 $753,000 and liabilities of $1.21 million, as at June 30.

The company reduced its secured debt to $5.1 million as at June 30 from $17 million a year earlier.

The shares were unchanged at 3 cents when the market opened, valuing the company at $2.72 million.

BusinessDesk.co.nz

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