10 Aug 2010

Allied Farmers puts capital raising on hold

7:50 am on 10 August 2010

The troubled Allied Farmers has suffered another blow, as its finance arm tries to avoid the prospect of being placed into receivership.

The company on Monday delayed plans to raise $19.3 million from investors until it has settled concerns raised by Allied Nationwide Finance's trustee over possible breaches of its Trust Deed.

Allied Nationwide says its trustee, Guardian Trust, believes the company has broken one of the Trust Deed's financial ratios.

Allied Farmers chairman John Loughlin disputes this, saying the trustee has been given financial information that shows the ratio of total liabilities to total tangible assets was, and is, being complied with.

Speaking before the capital raising was put on hold, Mr Loughlin said the finance company was taking steps to remedy the situation within the 14 days granted by the Trustee, though he would not say what those measures are.

Allied Nationwide Finance has said it is meeting all its financial obligations, and will be able to satisfy its trustee that its financial position is sound and avoid the possibility of being placed in receivership.

The company says an audit of its accounts is underway, which should be finished by the end of the month. It has suspended its prospectus until the matter has been resolved.

BNZ no longer willing to be standby lender

Separately, in Allied Nationwide's latest investment statement, it says the BNZ has indicated it doesn't want to continue to be the company's standby lender, and the two are in talks to allow Speirs Securities to a replacement standby funder or alternative funding.

The finance company also warns it doesn't have sufficient capital to meet the Government's new capital requirements.

Allied Nationwide's reinvestment rate has fallen from more than 48% in the six months to April to 29.3% in May.