Rumours of new Hanover bid greatly exaggerated

www.depositrates.co.nz

Wednesday 25th November 2009

News this morning of a second bid for Hanover and United Finance's assets appear to be greatly exaggerated.

The NZ Herald reported this morning that a second bid was in the wings and that it would be from a well-known and "trusted" company which had a track record of doing the right thing for investors.

Sources within Hanover have told depositrates.co.nz that Allied Farmers is the only company which has done due diligence on the finance companies assets.

It would be highly unlikely that a company would make a bid like Allied Farmers without doing due diligence.

Hanover has put out a statement saying Allied Farmers have done extensive due diligence.

"We have no knowledge of any other interested party, and we will not speculate on media commentary," Hanover chairman David Henry said.

It is "aware" of some other interest in the past few days, but now understands this is now not going to proceed in a formal offer.

"Instead, we understand this party may look to take a position with Allied Farmers if the vote is successful," Henry says.

Many names have surfaced including George Kerr and the new Torchlight Fund he is setting up at Perpetual Trust. Torchlight is taking on distressed property assets, similar to those held by Hanover.

Again depositrates.co.nz has been reliably informed Kerr, Perpetual, Marac and the ultimate listed parent company Pyne Gould are not going to put up an alternative proposal.

Sources have also ruled out South Canterbury Finance.

The sort of company that could do a debt-equity swap like Allied is proposing means it would need to be listed. Names which have been mentioned today include, GPG, Fisher and Paykel Appliances (which owns Fisher and Paykel Finance) and PGG Wrightsons.

Another possible company mentioned is Equitable, which is owned by the Spencer Family. However it is not listed and such a deal appears a little "edgy" for such a conservative company. However, Equitable did establish a finance company, Bastion, focussed on lower quality loans several years ago. Bastion was wound down last year.

The banks, and UDC (which is owned by ANZ National) are also unlikely to be rival suitors to Allied because of Basel reporting requirements which cover capital levels. If one was likely to be in the running it would be SBS Bank which has a subsidiary Finance Now that has previously acquired assets from failed finance companies such as Western Bay.

An independent report from Grant Samuel on the Allied Farmers' proposal is due out on Monday.

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