Allied Farmers taps professional investor to bolster its balance sheet

Thursday 1st October 2009

Allied Farmers, the rural services and finance group, will bolster its balance sheet this month, having secured a large professional investor to pony up some $7 million of additional capital.

The cash will give the company space to "consolidate and restructure" its business after it was forced to separate earlier this year amid a significant downturn in trading, according to chairman John Loughlin, though he was unwilling to divulge more information about the plans.

The proceeds will go towards strengthening Allied Farmers' position. Allied Farmers posted a $35 million loss in the year through June 30 from a $2.4 million profit a year earlier after it had to write down the value of its finance unit by about $21 million.

In July, the company split off its rural business in preparation for the declining strength of its loan book, and raised $6.3 million to pay for the restructure.

"It's a difficult environment to be trading in, and we took the view that it would be prudent to look after our shareholders," Loughlin told BusinessWire.

The initial raising covered the cost to create Allied Farmers Rural, the rural services entity and this new raising will be used for new spending, he said. The form of investment is yet to be finalised. The company hinted it may require shareholder approval and could involve a shareholder purchase plan.

Further announcements will be made this month, including the structure of the capital raising. The shares, which trade infrequently, closed at 28 cents yesterday, and have slumped 74% in the past year.

Businesswire.co.nz

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