19 Nov 2010

Subsidiary of Allied Farmers placed in receivership

1:08 pm on 19 November 2010

Shares in Allied Farmers fell 5% on Thursday after a wholly-owned subsidiary was placed in receivership.

Allied Farmers acquired Matarangi Beach Estates Ltd when it bought the assets of Hanover and United Finance late last year.

But the Coromandel property development was unable to repay a $19 million loan to HSBC.

Matarangi Beach Estates Ltd has always been one of Allied Farmers more difficult assets and a recent attempt to sell it drew no offers.

Last week HSBC demanded repayment of its loan, plus the the outstanding interest. The loan has been in default since last December.

Allied Farmer says the subsidiary and HSBC could not agree on a way to restructure the loan and Allied Farmers was not prepared to repay it, so the company was placed into receivership.

Managing director Rob Alloway says the bank has no recourse to Allied Farmers for the outstanding loans.

He also again criticised the way the assets were valued by Hanover, saying the valuations provided at the time they bought the assets, were unrealistic.

He says Hanover's directors, valuers, trustees and auditors should have provided better oversight.

Response by Hanover

Hanover has responded to the criticism, saying Allied Farmers is attempting to blame others for its own failings.

Independent director David Henry says Allied Farmers has managed the assets poorly, sold some quickly because of its distressed financial position, and failed to fulfil its obligations to investors.

Shares in Allied Farmers remain unchanged at 1.9 cents on Friday.