12 Aug 2010

Another writedown of Hanover Finance by Allied Farmers

10:44 pm on 12 August 2010

Allied Farmers has written down the value of its Hanover Finance assets again.

The troubled finance and rural services company says the assets are now worth $94.3 million, about a quarter of their $396 million purchase price in December.

The company has found it difficult to sell assets and recover loans in the slumping property development market.

Meanwhile, Standard and Poor's has lowered the credit rating of Allied Nationwide Finance from B to CC.

Allied Nationwide is currently in talks with its parent, Allied Farmers, to inject more capital into the lender, to fix a disputed breach of its Trust Deed.

Standard and Poor's says the downgrade reflects slow progress in selling assets and an injection of capital, and delays in borrowers repaying loans.

It is concerned Allied will not have enough cash to pay its investors on time.

Even if Allied NationWide meets its commitments this month, Standard & Poors questions how the company will be funded once the Government's retail deposit guarantee expires in October.

It says Allied Nationwide and Allied Farmers remain under pressure because it needs to sell assets fast, and secure finance from outside sources.

Standard and Poor's says the problems of both companies may undermine investor confidence.