How will the Allied Farmers deal work.

[whatsup]

How will this deal work , what are the numbers of shares issued and at what discount . Say theres $450 mil Hanover debt discounted to .60 in the $ , say $270 mil X by present Allied F share price at say .30 = 900 odd mill shares + present number of Allied shares and possible options .
Will there be any restriction of Hanover debt holders selling/dumping the Allied shares when their issued them other wise the Allied s price will be driven down to say .20 before the company has had a chance to realise any of the loans given that the Hanover is most probably 2nd,3rd or 4th in line anyway---- wheres the equity then.
Tough call IMHO!!!

[Dubdee]

Simplest explanation is on Chris Lee's website

[whatsup]

Simplest explanation is on Chris Lee's website

Doesnt sound too good for the poor Hanover investors , Hobsons choice IMHO.
P S if the Allied sp gets beaten down to h@ll then what banking covernants will be breached?

[whatsup]

Doesnt sound too good for the poor Hanover investors , Hobsons choice IMHO.
P S if the Allied sp gets beaten down to h@ll then what banking covernants will be breached?

Not to mention the Allied shareholders, whats in it for them once the SP hits .12---.15? and no sign of a let up for years to come???!!!

[GTM 3442]

Very poorly for most, I suspect, but very well for others.

More to the point, what will be left at the end ?

[whatsup]

All very quiet on this front considering the opportunities/ liabilities here , whatsup?

[Balance]

Opportunities?

If Hanover's debenture holders vote for this deal, there will be a queue all the way along Lambton Quay to get out of the ALF shares.

The blood will flow freely in the streets.

[Doyle]

It would seem that no-one on this forum has any money in these two dogs. In my experience most the allied farmers shareholders are farmers from the co-operative days or serious/institutional investors. While most hanover investors are people who find the sharemarket to risky for their risk profile. Hence the lack of interest from membersof this website.

Without a vested interest its hard to be excited about anything. Personally I think I might jump on board with this one, with the way the finance sector is allied may be one of the few second tier property lenders in the future. Finance is a bloody profitable business when its done right and not treated as a glorified personal bank account. But I think i'll wait until the shares are about 10 cents and jump on board at the expense of some poor elderly investor who doesn't have the stomach to deal with this fiasco anymore.

[POSSUM THE CAT]

Doyle if you wait a bit longer might even get down to one cent. Five would be my maximum.

[GTM 3442]

It would seem that no-one on this forum has any money in these two dogs. In my experience most the allied farmers shareholders are farmers from the co-operative days or serious/institutional investors. While most hanover investors are people who find the sharemarket to risky for their risk profile. Hence the lack of interest from membersof this website.

Without a vested interest its hard to be excited about anything. Personally I think I might jump on board with this one, with the way the finance sector is allied may be one of the few second tier property lenders in the future. Finance is a bloody profitable business when its done right and not treated as a glorified personal bank account. But I think i'll wait until the shares are about 10 cents and jump on board at the expense of some poor elderly investor who doesn't have the stomach to deal with this fiasco anymore.


Doyle, this thing is an unholy mess.

There will be some amount of value in ALF after this thing has happened, but I don't think that there's any way of telling what it will be yet.

I believe that if this thing is approved, there will be two "waves" of ALF shareholders selling.

First, those who just want "something, anything" back out of their Hanover money, and will sell ASAP. Depressing the price nicely.

Then a second wave, after the ALF sp hasn't recovered to give them back what they think they're entitled to. Depressing the price nicely.

Overall, I'm with Possum on this one - ALF will be "cheap" for some period of time, then start to recover, but don't be too keen to ride the sp down in the short term in the hope of a recovery.

[Dr_Who]

How much do you think the Hangover toxic assets are worth?

It wont be any where near what they say it is. If you think it is worth 70 cents, you should go back to sleep and continue dreaming, cos thats all it is, a dream. Or is it a nightmare.

I just enjoy all the BS reporting in the papers. Where have all the investigative journalist gone?

[Doyle]

How much do you think the Hangover toxic assets are worth?

It wont be any where near what they say it is. If you think it is worth 70 cents, you should go back to sleep and continue dreaming, cos thats all it is, a dream. Or is it a nightmare.

I just enjoy all the BS reporting in the papers. Where have all the investigative journalist gone?


I would place some crdence in the bottom range of PWC's report so at least 56 cents. To be honest property developments have recvoered better than I thought they would. I realise most of you would be quite disparaging towards that PWC report but I remember reading at the time and think it reaked of common sense. And I wouldn't be to quick to assume anything about hanovers estimate, while it was abundantly clear that $1 was never realistic, the board may even have a motive to depress their estimates at the moment in order to encourage the vote on this deal. The last thing Hotchin and Watson want is to have to pay antoher 20 mil into this dog, I suspect Hotchin may even have a big mortgage he is struggling to pay. So for him Allied is an attractive aption with receivership a close second. Therefore might now be in their interest to create more conservative than necesary estimates.

[Dr_Who]

I would place some crdence in the bottom range of PWC's report so at least 56 cents.

You are not even close. Much lower.

[777]

Well the Allied shareholders have voted in favour. 92% of less than half of the shares on issue.

[COLIN]

It seems to me that the only way the ALF share price could be saved from a precipitous plunge, once the Hanover investors receive their allocations, is if a band of institutions with large pockets is waiting on the sidelines to effectively "underwrite" the price by soaking up the volume and eventually releasing it in small parcels over an extended period of time, to create some semblance of an orderly market. Perhaps Hotchin and Watson have arranged such a group. If not, they had better be out of the country until the furore dies down. Umbrellas, walking sticks, zimmer frames and mobility scooters can be formidable weapons in the hands of Grey Power members.

I think I saw something in the news this morning about the first stage of Henderson's Five Mile development being sold for about $11m. This is way, way short of what Hanover are owed - something like $90m isn't it. Goodness knows what the second stage could fetch - are there any more stages?

I wouldn't touch this with the proverbial bargepole at anywhere near this juncture, but in course of time ALF might possibly offer value potential. That could be many months away, if it was ever to happen.

[Balance]

The Hanover investors are being herded to the slaughter house.

Do they march in tomorrow to the slaughterhouse or do they say "enough is enough" - receivership could be a good thing than this charade?

[paul29]

If Allied Farmers can refinanced alot of these loans i think people should do the maths there could be alot of money in this with collection costs and default fees


default interest is 30%

[Dr_Who]

Damned if you do, damned if you dont.

.....and the winner is, by K.O..... the promoters in the left corner.. yet again.

[Balance]

If Allied Farmers can refinanced alot of these loans i think people should do the maths there could be alot of money in this with collection costs and default fees


default interest is 30%

Default interest rate could be 1000% and it doesn't matter one iota.

Fact is that just about all the developers are broke and the loans are not recoverable in full. No point beating a dead man - dead is dead.

Be fascinating to find out if the related party loans to Hotchin and Watson had personal guarantees.

[Balance]

Damned if you do, damned if you dont.

.....and the winner is, by K.O..... the promoters in the left corner.. yet again.

But of course. That's the nature of the game.

Why do lawyers encourage acrimony in every dispute they advise on? Fees and more fees.

[paul29]

Default interest rate could be 1000% and it doesn't matter one iota.

Fact is that just about all the developers are broke and the loans are not recoverable in full. No point beating a dead man - dead is dead.

Be fascinating to find out if the related party loans to Hotchin and Watson had personal guarantees.

Its all about refinance and credit control hopefully there other developers that are not broke? for this to work they need more cash


They will refinance alot of the loans

[Balance]

Its all about refinance and credit control hopefully there other developers that are not broke? for this to work they need more cash


They will refinance alot of the loans

Refinance? From who? There are billions of uncompleted developments - who is going to buy them?

Banks avoided these developments in the first place and if they lent, it was on first mortgages.

Most of the loans and developers are stuffed like last Christmas's turkeys.

Sad but true.

[Doyle]

At this rate the Sp might hit 1 or 2 cents after hanover depsitors get a hold of theirs. Already existing shareholders are diving for cover.:eek:

[COLIN]

It also seems to me that there is a lot of room for market manipulation of the share price over the period on which the calculation of the conversion price will be based. There are also great opportunities for short-selling of ALF shares.

My advice would be: Don't get involved unless you know ABSOLUTELY what you are doing and what you are up against.

[777]

One thing that looks crooked is the shares go ex 1 for 10 bonus on the same day of calculation. This gives a theoretical 10% drop at that time. And then the fall will start.

[shawsie]

I am looking at a 5 year chart that starts at 270 finishes at 20 and looks pretty much like my daughters slide in between.

I dont think start falling is quite accurate.

this is like saving the Titanic with a kayak.

[imac_jim]

I suspect that is this one of those win win business arrangements but with a hidden twist in there that is difficult to spot with the information given at the moment. If Watson & Hotchin sell a lemon to Allied they will be lynched by both lots of investors on zimmer frames and tractors. Not worth worrying over 10m here and there as there, as the big thing will be to keep an eye on how the overall assets are handled for the conversion either into shares or the receivership.

I would surprised if someone doesn't come out on the wrong side of it and I think it could be the investors if Allied doesn't release enough supporting information after it goes through. The valuation on Hanover deal at $400m gets played down due to current market more than it should - "have to take what we can get" so it is attractive to the buyer and it gets taken off their hands. What is the real value now?

I suspect that Hanover is playing down the value, but paint up the deal with Allied that claims to get more value from the assets. I wouldn't be surprised after the deal goes though that a revaluation will be done, and it will come out that the value of the assets has increased, but by that time all the initial investors wanting to get out would of bailed on it. I see that the share price for ALF is still bottoming out, but some increased turnover happening. If there is no market of buyers now there won't be after the deal unless a lot of positive news is created turn things round.

Maybe it is a reason to push the ALF lower as it would allow more leverage on the holding, but it would also throw out more investors as the volatility on the share price sub .20 cents will create some big swings.

I wouldn't be surprised if there was some stock bashing going on to drive the ALF price lower so Watson & Hotchin (or someone else connected to them) can buy it up at > %50 discount on the day after any sell off since they are ones that would know the true value. Getting out of their 20m? commitment on Jan 1? would allow them to get a good size holding again if they wanted to buy back in.

[Dr_Who]

Has GPG gone through the Hanover books and said... this is alot of crap and started selling down their ALF holding?

Just a guess. Someone out there doesnt like the deal and selling it down hard and fast.

[imac_jim]

Someone seems to be buying up at .20 today but now it breaks down further... how low will it go?

Wise man once said.. he who catches falling knife gets bloody hands. ouch..

[whatsup]

I suspect that is this one of those win win business arrangements but with a hidden twist in there that is difficult to spot with the information given at the moment. If Watson & Hotchin sell a lemon to Allied they will be lynched by both lots of investors on zimmer frames and tractors. Not worth worrying over 10m here and there as there, as the big thing will be to keep an eye on how the overall assets are handled for the conversion either into shares or the receivership.

I would surprised if someone doesn't come out on the wrong side of it and I think it could be the investors if Allied doesn't release enough supporting information after it goes through. The valuation on Hanover deal at $400m gets played down due to current market more than it should - "have to take what we can get" so it is attractive to the buyer and it gets taken off their hands. What is the real value now?

I suspect that Hanover is playing down the value, but paint it up the deal with Allied that claims to get more value from the assets. I wouldn't be surprised after the deal goes though that a revaluation will be done, and it will come out that the value of the assets has increased, but by that time all the initial investors wanting to get out would of bailed on it. I see that the share price for ALF is still bottoming out, but some increased turnover happening. If there is no market of buyers now there won't be after the deal unless a lot of positive news is created turn things round.

Maybe it is a reason to push the ALF lower as it would allow more leverage on the holding, but it would also throw out more investors as the volatility on the share price sub .20 cents will create some big swings.

I wouldn't be surprised if there was some stock bashing going on to drive the ALF price lower so Watson & Hotchin (or someone else connected to them) can buy up at > %50 discount on the day after any sell off since they are ones that would know the true value. Getting out of their 20m? commitment on Jan 1? would allow them to get a good size holding again if they wanted to buy back in.

Jim the Hanover debenture holders have not got their hands on Allied shares yet so they cant infulence the Allied s p , just you wait until then the real game begins
Ask .06
Offer .025

[COLIN]

It also seems to me that there is a lot of room for market manipulation of the share price over the period on which the calculation of the conversion price will be based. There are also great opportunities for short-selling of ALF shares.

My advice would be: Don't get involved unless you know ABSOLUTELY what you are doing and what you are up against.

And now the NZX has called in the Securities Commission. This can of worms is looking more maggoty by the day.

[macduffy]

And now the NZX has called in the Securities Commission. This can of worms is looking more maggoty by the day.

But why should anyone be surprised that Allied Farmers shareholders are selling? I suspect that a lot of them don't like the deal any more than the Hanover debenture holders do.

Disc: No involvement, thankfully.

[777]

I am surprised that more existing ALF shareholders have not sold down. Hardly a need to call in the Securities Commission. I have this feeling that the NZX doesn't know how a market works.

[Dr_Who]

This whole thing is turning into custard, as expected.

What do you get when you put a leaky home on top of a pile of sand?

[imac_jim]

Just like an arranged marriage really. Not good if your partner got whacked with the ugly stick a few too many times.

[troyvdh]

....is al this over $70000.....hardly worth getting in a tiz about i would have thought....

[troyvdh]

....sorry..but am i correct in stating that ALF have 0 nta...0 eps....are heavily/negatively geared...worth somethng like...7 million...and are taking on an outfit with a"value" of approx 400 million dollars ...who admit to having 80 % of that as "bad"....has the world gone trully mad....or am i missing something...

[percy]

troyvdh
you are correct,
these threads save us a lot of time looking at bad deals,and losing good money.
you are not missing anything,and are helping others look past the pr tripe.

[Dr_Who]

Has GPG gone through the Hanover books and said... this is alot of crap and started selling down their ALF holding?

Just a guess. Someone out there doesnt like the deal and selling it down hard and fast.

GPG gets rid of Allied shares ahead of Hanover vote

http://www.stuff.co.nz/business/industries/3164579/GPG-gets-rid-of-Allied-shares-ahead-of-Hanover-vote

[Balance]

GPG gets rid of Allied shares ahead of Hanover vote

http://www.stuff.co.nz/business/industries/3164579/GPG-gets-rid-of-Allied-shares-ahead-of-Hanover-vote

And the NZX has referred GPG's selling to the Securities Commission for further investigation?

Shows what kind of organisation the NZX is. They have NO idea what share trading and investment is about.

[rainey]

The reason for GPG selling should be obvious to anybody with half a b----

[Balance]

The reason for GPG selling should be obvious to anybody with half a b----

Now we have the true measure of those highly-regarded executives at the NZX.

[blackcap]

What can the securites commision investigate? Surely GPG is allowed to sell its stake without disclosing this. Nothing wrong on the part of GPG here. Like Gibbs said... a pile of custard....

[macduffy]

What can the securites commision investigate? Surely GPG is allowed to sell its stake without disclosing this. Nothing wrong on the part of GPG here. Like Gibbs said... a pile of custard....

Exactly.

GPG aren't insiders, don't have a representative on the board and are only exercising their judgement in selling their shares.

Another example of NZX/Securites Commission not seeing the wood for the trees. Tragic, really, when there are so many real issues that the Securities Commission could have/should be giving their attention to.

Disc: Not holding ALF, nor likely to, but still have a few GPG, unfortunately.

[Doyle]

Something has occured to me, Rob Alloway said there was a mechanism to adjust Hanover depositors investment if loans did not perform as expected. What is this mechanism? I've tried to find out but instead of DMOR Decided someone here would have a simple explanation.

[bull....]

The shares may be only a couple of cents if the transaction goes thru thats why GPG dumped better to get some money out than none.
Will the NZX investigate a 50% fall in price in a day after the transaction gos thru, if it does?

[777]

Passed with 75.4% vote.

[minimoke]

Good luck to Hanover investors _ I bet they won't get $0.78. Hotchin and Watson will be relieved. No $20m cash up nor delving through the Hanover accounts in recivership. Such a smaal margin - I reckon there should be a fourth count of the votes.

[Doyle]

Picks on close tomorrow?

I'm thinking won't be many sellers tomorrow, not many hanover investors will have FIN numbers etc, and some of them will probably take a few days to get their act together. Won't be many buyers either as no one will be interested yet except for fund managers and even they would probably have the good sense to wait.

Im Picking A close of 16 cents tommorrow. But 10 cents before we close for christmas. Fundies won't have any need to panic and will start picking them up next year.

[Balance]

Picks on close tomorrow?

I'm thinking won't be many sellers tomorrow, not many hanover investors will have FIN numbers etc, and some of them will probably take a few days to get their act together. Won't be many buyers either as no one will be interested yet except for fund managers and even they would probably have the good sense to wait.

Im Picking A close of 16 cents tommorrow. But 10 cents before we close for christmas. Fundies won't have any need to panic and will start picking them up next year.

Why would fundies want to pick them up?

ALF's track record is one of wealth desatruction - not wealth creation.

A small dog plus a big dog = two dogs.

[777]

Remember they are also ex bonus tomorrow which gives them a theoretical 18c to begin with. There are 4 buyers in there for 158,000 shares. My guess is they thought that the vote would fail. They will all be removed before trading xb tomorrow. I don't think anyone would want to pay more than 10c at opening. It will be interesting to watch.

I am usually wrong so act on that.

[Dr_Who]

Fools with their money are easily parted again and again and again and again. Hanover investors is a good example. They will never learn.

I dont think the funds will want any of this. GPG dumping the stock is a very good example why the funds are staying clear. The fact that GPG is dumping the stock should have been a big flashing sign for the Hanover investor to vote NO.

Maybe less than 10 cents is good start for ALF once Hanover investors get their allocation. Who knows, even GPG cant value this dog... WOOF WOOF.

[winner69]

Remember they are also ex bonus tomorrow which gives them a theoretical 18c to begin with.

Is it that simple with those bonus shares? ..... I thought they weren't going to be listed seeing there are heaps of conditions around them

[winner69]

I think they should stay in a trading halt until all the paper work is done otherwise chaos will reign

[whatsup]

If you really want the see where Allied F is heading, have a look where GFL is now compared the the share swap for debenture money is now , I think from memory they were allocated at .30 per $ value and the swapped shares are now selling at offer .07 last sale at .09 , a synic could say that GFL is a better quality of debenture as it has a mix of end users where as Allied F...., (now ex Hanover ) is all property some very cr@ppy at that , IMHO is my considered view only.

[777]

Is it that simple with those bonus shares? ..... I thought they weren't going to be listed seeing there are heaps of conditions around them

Well as I see it they had a value today inclusive of the bonus and tomorrow exclusive of the bonus. How ever in reality the huge issue of shares to Hanover investors will drive the price. The unknown is what number of Hanover investors will know what to do with the shares. Some may take a week or two to act simply because of unfamiliarity with share dealing. All in all a sad state of affairs for a lot of people. No doubt Hotchin is celebrating tonight because of the outcome and also his win over the ACC. Not just a small exceedance of the rules that we have to comply with.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10615791

[Doyle]

Why would fundies want to pick them up?

ALF's track record is one of wealth desatruction - not wealth creation.

A small dog plus a big dog = two dogs.

ALF will enter the TOP 50 easily, so managers of indexed funds will have no choice but to pick them up at some stage in order to keep their allocations. Even at 5 cents a share I think ALF would still be in the top 50 just.

Can't wait to see how many sellers come to market today, it hasn't even opened yet and already my call of 16 cents close is looking on the high side.

[Balance]

ALF will enter the TOP 50 easily, so managers of indexed funds will have no choice but to pick them up at some stage in order to keep their allocations. Even at 5 cents a share I think ALF would still be in the top 50 just.

Can't wait to see how many sellers come to market today, it hasn't even opened yet and already my call of 16 cents close is looking on the high side.

Don't hold your breath - PGC is not in the NZX50 and has a bigger market cap than half the companies in there.

Watch the panic set in and the Hanover investors all head for the exit door - all at the same time.

[Doyle]

Do you think that this trading halt is ever going to lift? I've been waiting all morning for the blood letting to start.

[Contrarian]

Gidday
So they are still working on the terms? I think they have had ample time before the meeting to "work on the terms" More like doing some book build type agreements for some deep pockets to agree on a minimum they will allow the price to fall to, Hope for their sakes they know what they are doing & have crystal and/or steel balls.

[777]

Halt to be lifted at 11.45am.

[Aeneas]

Don't hold your breath - PGC is not in the NZX50 and has a bigger market cap than half the companies in there.

Watch the panic set in and the Hanover investors all head for the exit door - all at the same time.

PGC is not in the 50 as there is not enough free float despite its market cap. Thats not going to be Allied's problem. Back of the envelope calculations suggest that at $400m they will go in around 35 into the 50. Share price could fall by up to 40% and they will still make the 50.

[bull....]

Dont think any panic selling will happen until hanover investors get there script.
Then all the ones who didnt like the deal may bale , um maybe about 900 mil shares lol

[Dr_Who]

I just love this index Bull****.

Who the hell would put their money in these funds that indexes?

[BRICKS]

Dont think any panic selling will happen until hanover investors get there script.
Then all the ones who didnt like the deal may bale , um maybe about 900 mil shares lol

WHO is going to buy these shares panic or otherwise you wont have enough money to
go AROUND..

[Balance]

PGC is not in the 50 as there is not enough free float despite its market cap. Thats not going to be Allied's problem. Back of the envelope calculations suggest that at $400m they will go in around 35 into the 50. Share price could fall by up to 40% and they will still make the 50.

Agree with you about PGC before the recap. Now it has more free float than Cavalier, PRC etc.

My pick is that ALF will be down to 3c by the time the golden oldies panic out.

[bull....]

well maybe it will dump guess at 5c 900 mil will only cost 45 mil like some say the funds can put mums money to work buying them. think it is about 1.8 bil shares coming ? sounds like the end of the world to me

[biker]

GPG must be smiling. Not that there is much money involved but who the hell would have bought their shares ?

[whatsup]

.12 buy
.15 sell

And this is just day one of the future, boy o boy!!!

[Stranger_Danger]

Oh dear.

The next few weeks are actually going to be quite funny.

[minimoke]

Oh dear.

The next few weeks are actually going to be quite funny.
Unless you were in Hanover. Is there going to be no end to the old folks being asked to bend over and get shafted again and again and again.

[shawsie]

... valuing (@12) hanover assets at around 220m or about 45c per $1 debenture,

what was bridgecorp, 23 or so from memory?

[Balance]

Unless you were in Hanover. Is there going to be no end to the old folks being asked to bend over and get shafted again and again and again.

They voted for this one?

[minimoke]

They voted for this one?
They sure did. I think its called "Hobsons Choice" or "betwen a rock and a hard place". But all credit to Hotchin. A $10m (I assume he and Watson were going halves in the $20m stake) payday for a few days work fronting those meetings.

[whatsup]

They voted for this one?

Hobsons choice!!!

[Balance]

Hobsons choice!!!

Not really.

Receivership is not the end of the world. There are companies which have emerged from receiverships - eg. Smiths City.

Financial advisors were actively encouraging their clients to vote for the ALF proposal so that there's no comeback on them. That's where the votes came from.

[whatsup]

Not really.

Receivership is not the end of the world. There are companies which have emerged from receiverships - eg. Smiths City.

Financial advisors were actively encouraging their clients to vote for the ALF proposal so that there's no comeback on them. That's where the votes came from.

Name me a property company in a falling market?

[Doyle]

At the end of the day there will be a limit to how low it will go for now. Maybe run out of sellers at around 5 cents, at that price starts to represent about 18 cents in the dollar. In which case debenture holders will start to think might as well hold on to them and see how it pans out- I.e nothing to lose sydrome. If I was a hanover holder I would be fighting tooth and nail to get to a sharebroker. Some of the organised people will get out today but most of them probably won't be ready till after christmas by which time the boat will have sailed and the will be better off sticking with ALF for the long haul (maybe).

[Balance]

Name me a property company in a falling market?

Let me put it another way - is ALF going to do a better job than a receiver in holding and then, realising asset values?

ALF cannot even take care of its own businesses over the years!

[Silverlight]

At the end of the day there will be a limit to how low it will go for now. Maybe run out of sellers at around 5 cents, at that price starts to represent about 18 cents in the dollar. In which case debenture holders will start to think might as well hold on to them and see how it pans out- I.e nothing to lose sydrome. If I was a hanover holder I would be fighting tooth and nail to get to a sharebroker. Some of the organised people will get out today but most of them probably won't be ready till after christmas by which time the boat will have sailed and the will be better off sticking with ALF for the long haul (maybe).
Settlement/ allotment does not occur until tomorrow, so no Hanover holder will recieve shares until tomorrow at the earliest.

[Arbitrage]

If you want a medium to long term punt, this would have to be on your watch list.
I am sure there are some cashed up people following the price closely waiting for value.

[shawsie]

so Doyle, you surmise a lingering death, rather than an oversell, and opportunity on the uptick?

18c against Grant Samuels 56?

these guys had a business model that was never going to survive deleveraging, but is their book as bad as the incompetents of BCorp?

or is ALF going to mismange the debt recovery more than a receiver would (and I admit this is not improbable)

[Doyle]

so Doyle, you surmise a lingering death, rather than an oversell, and opportunity on the uptick?

18c against Grant Samuels 56?

these guys had a business model that was never going to survive deleveraging, but is their book as bad as the incompetents of BCorp?

or is ALF going to mismange the debt recovery more than a receiver would (and I admit this is not improbable)

I dont think it was grant samuel with 56cents? I think that was the old PWC report. No I'm just saying take that 56 cents subtract the 6 cents already received, discount it over 4 years and you get somewhere around 30 cents depnding on the discount rate. I think 9% is about a fair rate to be using.
So the assets are maybe worth 30 cents in the dollar today. Therefore fair value somewhere around 8-9 cents per security. Given the nature of the weak shareholders though would expect it to be oversold. therefore think it will bottom out around 5 cents at which point hanover people should give up selling. I personally intend to buy some when the price is right, there is not alot of second tier property lending left in NZ and if they play this right they will end up as a serious property finance company able to cherry pick the better loans.

But the price has a long way to drop before I will be interested.

[blockhead]

I guess when it gets low enough Hotchin et al will be leveraging some leveraged property somewhere and getting back in.

[troyvdh]

I do find it interesting that many folk are jumping in at 14-15 cents...when i would have thought it more prudent to wait...this play is going to last for at least 4-5 years....thats the market I suppose.

Does anyone know at what price GPG got in at....

[Contrarian]

Gidday
GPG about 70cps

[paul29]

Thu, 17 Dec 2009 1:58pm
Allied Farmers Ltd shares fell 1.3c to 16c by early afternoon after they resumed trading today in the wake of a meeting of Hanover Group investors yesterday.

The investors narrowly approved a proposal for Allied Farmers to purchase of assets of Hanover Group in an share to debt transaction.

Allied Farmers confirmed that Allied Farmers shares will be issued to Hanover and United investors at 20c a share.

Allied Farmers said it was working through the requirements to satisfy remaining conditions, which include formal approvals from the external bank and third party funders of the companies it is acquiring. Allied Farmers managing director Rob Alloway said It had been very pleasing to see how the banks and funders of the Hanover and United property owning companies had responded to the proposal and the positive vote that was achieved yesterday.

"We are just completing some important final steps with some of them and we have no reason to believe at this time that we will not get all the approvals we require by later today," he said.

"The financial position of the group will be materially improved by the transaction and this is a position that is being recognised by our banking partners," he said.

He said completion of the deal was still expected to be tomorrow.

A Hanover Finance investor who held $10,000 of debenture stock at December 2008 would receive 34,794 new Allied Farmers ordinary shares. NZPA


34,794 for 28.7 cents to get back $10,000 of debenture stock

34,794 last trade 15 cents = $5219.10

did i read that right ?

A Hanover Finance investor who held $10,000 of debenture stock at December 2008 would receive 34,794 new Allied Farmers ordinary shares

[minimoke]

34,794 for 28.7 cents to get back $10,000 of debenture stock

34,794 last trade 15 cents = $5219.10

did i read that right ?

Not quite. The $10,000 converts into 32,794 shares at 20.7 cents each. So at that point teh value is $6,788. So clearly the 70 cents in teh dollar isnt there not is teh Grant Samules view that this woudl be a better deal than remaining in Hanover.

Price yesterday at $0.15 means the $10,000 is now worth $4,919 less brokerage fees.

Meanwhile Hotchins and Watsons $20m they didn't have to put back in rises in value by $3,000 a day.

[Dr_Who]

Who are these crazy people paying 15 cents for ALF? Maybe the relatives and friends of Hanover finance that think ALF is cheap at 15 cents? lol

I had someone at a party once tell me that a share below 20 cents is cheap cos you cant even buy a lolly at the dairy with 20 cents these days. I told him that he has a good insight into the stockmarket and he should put his CV into Goldman Sachs for a stockbroking job...lol

[BRICKS]

Well many years ago there was many a takeover done in this maner stock that went to
very low prices like the new ALF say a cent a big buyer would come along and buy the lot
it was like buying discounted money takeover turn it around and WIN..

The losers where the sellers but in this world they dont count, so dont worry the wolfs
are standing on the SIDELINES.. Just wait and SEE..

[Balance]

Who are these crazy people paying 15 cents for ALF? Maybe the relatives and friends of Hanover finance that think ALF is cheap at 15 cents? lol

I had someone at a party once tell me that a share below 20 cents is cheap cos you cant even buy a lolly at the dairy with 20 cents these days. I told him that he has a good insight into the stockmarket and he should put his CV into Goldman Sachs for a stockbroking job...lol

It's called short covering. Clever (not crazy) people making money.

[Doyle]

Maybe some of the directors have agreed to support the share price in the short term? They don't strike me as the type with deep pockets.

To give you an idea of the average allied farmers shareholder though, both my uncle and grandfather are allied farmers shareholders from the co-op days and both are farmers. My Uncle knows I'm into sharetrading and said to me that I should get into Allied Farmers because its shares simply have to be cheap at 19 cents. I told him I wouldn't check my share price for about 5 years If I was him. My Grandad was so disgusted he refused to even vote.

I'm suprised so many have had the good sense to get out now before the tsunami hits. It does leave one ? though who are the muppets that are buying?

Also it says the shares will be registered today so those who already have a CSN and Fin should be able to sell today correct? I believe the Tsunami is forming.

[bull....]

Guess the people buying now are using the average down approach buy 15 buy 12 buy 8 buy 5 etc just buy more at the lower prices brings your average right down.
Of course to use this approach you must believe the company will be a good proposition in the future otherwise you will lose a hell of a lot of money.

[Doyle]

It's called short covering. Clever (not crazy) people making money.

Why buy back your short now when you know it will be cheaper in a few days?

[minimoke]

Guess the people buying now are using the average down approach buy 15 buy 12 buy 8 buy 5 etc just buy more at the lower prices brings your average right down.
Of course to use this approach you must believe the company will be a good proposition in the future otherwise you will lose a hell of a lot of money.
On these threads its known as "Doing A Belg"

[Balance]

Why buy back your short now when you know it will be cheaper in a few days?

Short at 30c and buy back at 15c.

Why be greedy?

[BRICKS]

Short at 30c and buy back at 15c.

Why be greedy?

TRY getting a short position just pipe dreams NO brokers will do it.. so NO fibs..

[blackcap]

TRY getting a short position just pipe dreams NO brokers will do it.. so NO fibs..


Why is the NZX so ANAL about shorting? Its widely accepted in other jurisdictions. Doesnt it also increase liquidity which is supposedly a good thing?

[Silverlight]

Its nothing to do with NZX, they actually produce a short sale report (http://www.nzx.com/markets/NZSX/NZX/announcements/3126627/NZX-Short-Sale-Report-November-2009)monthly.


The NZ brokers don't want to take the risk, except to probably big institution clients who know they can cover their positions.

[blackcap]

They dont do anything to stimulate it either do they. I thought it would have been in brokeres interests to stimulate it as it means more brokerage either way. If fact double dipping, with a buy and hold you have one deal. With a short you have a gauranteed 2 deals.

So why are brokers not offering this service?

I still think the answer lies with the NZX and delivery rules.....

[Dr_Who]

So why are brokers not offering this service?

I still think the answer lies with the NZX and delivery rules.....

Dont think ALF is liquid enough to borrow stock to short. This may all change with the new issue of 900 million shares soon. If you can short ALF the sp may even go lower than 5 cents..lol:eek:

[Balance]

TRY getting a short position just pipe dreams NO brokers will do it.. so NO fibs..

Depends on who you deal with, matey.

You have just revealed yourself as inconsequential to the brokers you deal with or you are dealing with brokers who do not offer short-selling.

[Doyle]

Short at 30c and buy back at 15c.

Why be greedy?

Because the the share price going down further is such a safe bet that, its probably more secure than a government guarenteed deposit. Still I agree it does seem to be the most plausible explanation for the amount of buying going on.


I just can't see anyone thinking they have deep enough pockets to support the share Price, and what incentive they have to do it?

[peat]

perfect breakout of a descending triangle !

[BRICKS]

Depends on who you deal with, matey.

You have just revealed yourself as inconsequential to the brokers you deal with or you are dealing with brokers who do not offer short-selling.

YOU where told not to fib or name your broker who IS prepared..

[bull....]

short selling would help the liquidity on the nzx but who would offer it I dont think theres many brokers left to make a market for it?

[Balance]

YOU where told not to fib or name your broker who IS prepared..

Do your own homework, matey. No freebies or fibs from me.

[BRICKS]

Do your own homework, matey. No freebies or fibs from me.

WITH answers like this who needs freebies or fibs because as stated above was CRAP in the beginning ...

[Balance]

WITH answers like this who needs freebies or fibs because as stated above was CRAP in the beginning ...

Now we know the quality of your postings and dealings. Can't even get a shorting account with a broker!

[BRICKS]

Now we know the quality of your postings and dealings. Can't even get a shorting account with a broker!

WHO to say your got one then who wants one.. try again..

[dragonz]

I'm not sure if some punters know how short sales work. I think silverlight released a short report. makes for some interesting reading and is a must for short term punters.

All you need to do is ring around some brokers to see what shares they are willing to short. Normaly what happens is that they have a stock of "long term investers" that are willing to lend shares at an agreed % point. Shorts are normally short term so you borrow these shares then sell them immediately on market. At some time you need to cover so hopefully buy them down trhe track for for a lower price and repay the broker in the original shares plus interest. No hope in hell finding someone willing to short ALF.

Interestly CUE and HGD and been available, plus the usaul lager companies, tel, amp ect.

If I was to make a purchase depending on shorts I would go with HGD and CUE. Both where heavily shorted during November and there will be a day of reackoning if the fundementals are right.

[dragonz]

Oh dear.

The next few weeks are actually going to be quite funny.

Not so funny Stranger. I hnow some Oldies that got sucked into this one. I havnt bothered to work out the fundals on this one yet but there is bound to be a panic and could create an excellant buying oppurtunity once the dust settles.

[Silverlight]

I highly doubt HGD or CUE are actually being sold short.

I think more than likely it will be traders selling short the stock here and covering their position on the ASX instantly for price arbitrage, so a fictional short sale if you will.

There are not many brokers that are willing to lend stock for shorting purposes, esp. to retail traders.

[dragonz]

I highly doubt HGD or CUE are actually being sold short.

I think more than likely it will be traders selling short the stock here and covering their position on the ASX instantly for price arbitrage, so a fictional short sale if you will.

There are not many brokers that are willing to lend stock for shorting purposes, esp. to retail traders.

Most of the shorts reported to the NZX where dual listed so I think you may be right.

[Balance]

There are not many brokers that are willing to lend stock for shorting purposes, esp. to retail traders.

Exactly. Shorting facilities are available selectively.

[shawsie]

dragonz, silverlight thats for your insight, time well spent

other posters, take several chill pills before you put your thoughts on this forum thanks, no place for that attitude here

[winner69]

So by the time the Hangover people get their zillions of ALF shares they will only be woth half of what they thought they were getting .... whoops

[Dr_Who]

So by the time the Hangover people get their zillions of ALF shares they will only be woth half of what they thought they were getting .... whoops

The writing was on the wall. The signs were flashing loud and clear. If only they had visited ST and read the posts. They voted the HAngover duel a jail free card.

1.9 billion more shares issued ... ROFL!

[GTM 3442]

There's some interest though. . .

Bids for 3.2 million
Offers of 1.3 million

Ten cents at the moment - predictions, anyone ?

[777]

5c before settling down at 10c.

I notice the "h" in Wellington.

[Dr_Who]

There's some interest though. . .

Bids for 3.2 million
Offers of 1.3 million

Ten cents at the moment - predictions, anyone ?

There was interests at 30 cents
More interest at 20 cents
More interest at 15 cents
More interest at 10 cents......

lol

here comes 5 cents

[Silverlight]

1.2m at 10 cents is only 120k, 2m down to 6 cents, 5.2m down to 1 cent.

Total value on bid is only $271k.


Also at 10 cents the market cap is only $195m, I think they would need a cap of over 200 maybe 225m to break the NZX50 in the next review. They would need over 400m to make a straight entry on the NZX50 methodology requirements.

[winner69]

Still has a market cap of $200m or so ... pretty big company now .... even bigger than RBD

[Balance]

Sadly, a lot of the Hanover investors will be reading the papers and will panic out.

Still a good idea to just get the heck out though as ALF brings no real expertise to the game.

[Steve]

So at 10c closing, the Hanover/United investors are down 50% on paper from their issue price?

At least they now have some indication of what their investment is currently worth, I guess.

[troyvdh]

..steve...in some circumstances you are probably right...but most holders (ex hanover) will be recieving documents today/tomorrow...some may have computers...some will not...some may have brokers...they will have to organise relationships with brokers,,,send faxes....understand the process...most will be eldery....frustrated...angry....intolerant....in despair....and during all this ....planning xmas celebrations with familys....I know a few

[Balance]

Most of the Hanover investors/new shareholders are scared ****less of the share market in the first place after their 1987 experiences.

The panic has only started.

The vultures are circling.

The carcass could be toxic though.

Best short around.

[tsb]

Yeah well who bought?
Disc
50000 @ $0.102

[Contrarian]

Gidday

$400 mill of receivables, market cap $200 mill ALF doesn't now have big loans in comparison to the $400 mill. ALF only have shareholders to satisfy at some stage, the clock is no longer ticking (accruing interest) except for ALF debtors.

The sharemarket is where there is a transfer of wealth from the impatient to the patient.

All IMHO

[dragonz]

Most of the Hanover investors/new shareholders are scared ****less of the share market in the first place after their 1987 experiences.

The panic has only started.

The vultures are circling.

The carcass could be toxic though.

Best short around.

With all due respect balance , we know you are one the the vultures circling. No one is shorting this share so lets get real. Good buying when the panic settles and you will be one of the biggest holders. Look at NPX. Funny how you went from bear to bull in such a short time. Newbies beware.:D

[shawsie]

at 1.9b shares I will not be entering this train wreck above 2c.

Repayments on debt will cover working capital, this is mezz finance on holes in the ground.

other finance companies were truly worth nothing.

there are no buyers, there is no market, for holes in the ground.

and what is their plan for future earning? Mezsz finance??

not and not likely to be a holder.

[troyvdh]

Balance..it appears that you are gleefull at the prospect of so many elderly folk being traumatised,depressed,suicidal...why so....

[Doyle]

Balance..it appears that you are gleefull at the prospect of so many elderly folk being traumatised,depressed,suicidal...why so....

Because it's a bloody good oppertunity to make money. The people who have lost money in this made their decisions, some I feel sorry for but the reality is thats why finance companies payed a risk premium.

I personally won't let other peoples losses stand in the way of me making money.

This talk of two cents who knows it may even hit that, the selling has only begun in my opinion, although I think we will see some support building at around 5 cents a share, if the sellers break that well 0.1cent is the limit I guess.

I intend to get on board once I pick a bottom.

[troyvdh]

..good on you...cheers

[Balance]

Balance..it appears that you are gleefull at the prospect of so many elderly folk being traumatised,depressed,suicidal...why so....

Gleeful? Just stating the obvious for all to read.

It is cold hard reality that the Hanover investors are not share investors. Assuming 10% of them want to get out, there will be 190m shares to be sold. Best short around.

BTW, there is not going to be any elderly folk reading this forum. Heck, they did not even bother to read the negative articles about Eric Watson over the years in the newspapers! Remember how Eric Watson was found to have done the dirty in court over Noel Leeming and Bendon by cutting out others? They were both high profile cases.

[Steve]

Because it's a bloody good oppertunity to make money. The people who have lost money in this made their decisions, some I feel sorry for but the reality is thats why finance companies payed a risk premium.

In reality, the risk premium was insufficient and effectively had been discounted in the rates offered by the finance companies at the time and there was stuff all analysis of this fact by the so-called 'experts' until the wheels fell off. The benefit of hindsight in order to see what was wrong all along.

I have some funds allocated to make a purchase into ALF should there be a blip in the shareprice in the very near future...

[Balance]

Read this if you want to know how truly immoral Eric and Mark are. But do they care? Up yours as far as they are concerned.

How Hanover Finance investor Gerrit Bax died after his money was frozen
December 15th, 2009


Fransiska Falconer talks about how her father Gerrit Bax died after finding out his life savings in Hanover Finance would not be available to pay for nursing care. Bax, an active man of 91, died in October without telling his children he could not afford to go into nursing care. Bax stopped eating and eventually died weighing 43kgs despite being 6 foot 1 tall.

His family wondered why he asked to be sent home from hospital against medical advice. Falconer has blamed Hanover Finance’s Mark Hotchin and Eric Watson for being indirectly responsible for his death and has called on them to sell their possessions to compensate investors.

Falconer talks about her efforts to talk to Hanover Finance founders Mark Hotchin and Eric Watson and what she’d like to see happen with Hanover Finance. She said after the interview she respected Hotchin’s bravery for fronting up to meetings with investors, but did not feel he had expressed remorse. She questioned Watson’s bravery in not fronting for the meetings.

Here’s what she said to Hotchin and Watson in a letter discussing the possibility (since dropped) of civil manslaughter charges against them:


Our family will never be able to hear the names Eric Watson, or Mark Hotchin without feelings of great moral injustice and we are sure that this distain will be reflected with many, many other New Zealanders and families. Eric Watson, and Mark Hotchin have ruined their family names and we can only rest
in the knowledge that ‘What you sow you will reap’ and then you may feel a little of what you have done to so many loved and cherished New Zealand families and investors.

You may build your flash houses, wear designer clothes, travel, million dollar parties but you have indirectly taken my father’s life to gain this and I for one cannot comprehend how you live with yourselves. No matter who you associate with they will know how you have robbed others to live your fraudulent fake lives and in their hearts they will disrespect you, but of course meantime enjoy the money you spin so freely on them. I would not want to destroy my children’s futures or family name like you both have done so blatantly.

When we drive by your homes we proclaim to our children that Gerrit Bax, my Dad, owns part of them.

[Steve]

Personally, I have never been a fan of EW and as a result have avoided investing where he has had involvement due to his reputation that preceeds him.

Out of interest, can anyone name something that EW has been involved in that has not lost investors money?

[biker]

Lots of talk about the price getting to 5c or below and buying when it does. I'll stick my neck out and say it wont get anywhere near there. Too much anticipation that it will.

[The BOWMAN]

Will this thing go bust like Feltex?

[dragonz]

Will this thing go bust like Feltex?

Good question bowman. I'm sorta hoping that Lisard, shasta or snoppy can give us a run down on the basic fundementals on this one. I've keeped a wee bit of powder dry and like most of us am willing to jump in once the dust settles.

[bull....]

Think there is high risk involved with this , anyway does allied finance have the govt gaurantee? if it does what happens when that comes off?

[winner69]

The pain suffered by the existing ALF shareholders has also been immense over the last few years and the last month or so .... going from 220 to 30 cents was pretty bad so the fall from 30 cents to 10 cents isn't that bad.

But then if punters had listened to BRICKS and others they wouldn't be in ALF anyway

Suppose the pain needed to become a big company instead of going broke.

[Balance]

In reality, the risk premium was insufficient and effectively had been discounted in the rates offered by the finance companies at the time and there was stuff all analysis of this fact by the so-called 'experts' until the wheels fell off. The benefit of hindsight in order to see what was wrong all along.

I have some funds allocated to make a purchase into ALF should there be a blip in the shareprice in the very near future...

Actually there were a few who warned and spoke out against exposures to the finance companies. They were forced to shut up or were simply ignored.

Such was the power of the 3% to 5% commission paid by the finance companies, and the lucrative deals being done on the side by developers etc.

You want your legs broken, you speak up.

And for what?

Bruce Sheppard was told to shut up at the Hanover's meeting which approved the moratorium. No wonder he called them too dumb and turkeys voting for early Christmases.

[Dr_Who]

Is there a list of the exact toxic assest ALF bought from Hangover?

We need to know exactly what they have bought in order to assess the value. There is a reason why it is call toxic. I wouldnt be too quick to jump in without knowing what the true value is. There will be alot of pain before (and if) there is any gains. This is evident with other listed finance companies.

[whatsup]

I think that .05 or less is reasonable FAIR VALUE for these shares considering all that there is known out in the public arena there are IMHO several large loans that will never be collected on due to
1/ no ready purchasers for the end product.
2/ Most of the loans were made on property developments were IMHO loaned on properties at what is now grossly inflated values and the loan money is under water and it will take up to 10 years for the "market " to regain that value/price.
3/Some if not all of these loans were made as 2nd,3rd or even 4th ranked mortgages with the interest charged payable on completion and sale of the projects, ie the interest due was capatilised and payable on project sale which has grossly added to the amount necessary to cover costs.
$/ Most is not all of the projects are loaned against valuations that now are hopelessly out of date and may be 50% over valued.

[Lizard]

Will this thing go bust like Feltex?


Good question bowman. I'm sorta hoping that Lisard, shasta or snoppy can give us a run down on the basic fundementals on this one.

Don't tempt me - I've got a long list of chores today which I need only a little coaxing to avoid...

I've got it on my To Do list, but haven't seen any urgency. Valuing financial service businesses is inherently difficult due to the leverage factor and cyclical nature. If anyone was to try running some kind of Monte Carlo analysis using the probabilities of all the inputs to valuing this business, the range and standard deviation of output "fair value" would be unusually wide.

However, my initial comments would be that it seems unlikely to go bust at this point. The recovery rate on remaining loans would probably have to be less than 55% to complete erode all that new equity and see them fail to repay existing debenture holders (and that includes existing ALF loans & deposits).

It seems likely, the credit bust is likely already leading to much better quality of loan opportunities for finance companies. Banks have become far more conservative in lending, leaving richer pickings for the next tier down. There will be plenty of demand, but the limiting factor may be in finding sufficient investors willing to invest in debentures. Finance companies may need to hold more equity, reducing returns on equity.

I would have thought, the "rock bottom" value for finance company shares might be somewhere around the NTA - once assets have been recognised at a truly fair value. In this regard, as many others have pointed out, it is going to depend somewhat on how much impairment has yet to be recorded against existing loans. However, at the current $191m market cap and $406m pro-forma equity, the market would appear to be already factoring in at least a $210m (26%) write-down in total assets.

[whatsup]

Don't tempt me - I've got a long list of chores today which I need only a little coaxing to avoid...

I've got it on my To Do list, but haven't seen any urgency. Valuing financial service businesses is inherently difficult due to the leverage factor and cyclical nature. If anyone was to try running some kind of Monte Carlo analysis using the probabilities of all the inputs to valuing this business, the range and standard deviation of output "fair value" would be unusually wide.

However, my initial comments would be that it seems unlikely to go bust at this point. The recovery rate on remaining loans would probably have to be less than 55% to complete erode all that new equity and see them fail to repay existing debenture holders (and that includes existing ALF loans & deposits).

It seems likely, the credit bust is likely already leading to much better quality of loan opportunities for finance companies. Banks have become far more conservative in lending, leaving richer pickings for the next tier down. There will be plenty of demand, but the limiting factor may be in finding sufficient investors willing to invest in debentures. Finance companies may need to hold more equity, reducing returns on equity.

I would have thought, the "rock bottom" value for finance company shares might be somewhere around the NTA - once assets have been recognised at a truly fair value. In this regard, as many others have pointed out, it is going to depend somewhat on how much impairment has yet to be recorded against existing loans. However, at the current $191m market cap and $406m pro-forma equity, the market would appear to be already factoring in at least a $210m (26%) write-down in total assets.

Value I would have thought would be NTA LESS APPROX 40%!!!

[Lizard]

Value I would have thought would be NTA LESS APPROX 40%!!!

Perhaps I should have bolded this part for you:
...once assets have been recognised at a truly fair value.

A healthy finance company (i.e. one with "normal" level of loan recovery) usually trades at levels well above NTA backing.

[Dubdee]

ALF with this massive injection of capital now has a fiighting chance of getting a BB rating and therefore being eligible for the Govt Guarantee extension. Remember their debentures which mature before October 2010 are already covered by GG.

True in assessing the ratios S&P or whomever wil look at the assets but remember these new assets are equity funded which ticks all the ratings boxes. Quite a clever deal for ALF who otherwise might have been handing the keys into RBNZ come October.

Given time I suspect a good proportion of loans might be collectable or collateral realised at less than totally distressed prices

[Balance]

ALF with this massive injection of capital now has a fiighting chance of getting a BB rating and therefore being eligible for the Govt Guarantee extension. Remember their debentures which mature before October 2010 are already covered by GG.

True in assessing the ratios S&P or whomever wil look at the assets but remember these new assets are equity funded which ticks all the ratings boxes. Quite a clever deal for ALF who otherwise might have been handing the keys into RBNZ come October.

Given time I suspect a good proportion of loans might be collectable or collateral realised at less than totally distressed prices

It's a fantastic deal for ALF, but an even better deal for Eric and Mark.

[winner69]

ALF with this massive injection of capital now has a fiighting chance of getting a BB rating and therefore being eligible for the Govt Guarantee extension. Remember their debentures which mature before October 2010 are already covered by GG.

True in assessing the ratios S&P or whomever wil look at the assets but remember these new assets are equity funded which ticks all the ratings boxes. Quite a clever deal for ALF who otherwise might have been handing the keys into RBNZ come October.

Given time I suspect a good proportion of loans might be collectable or collateral realised at less than totally distressed prices

Agree with you there mate this is a clever deal ... even though there are many reluctant equity holders ... never mind that as you say it shareholders capital that bought the assets to the table.

The red herring going forward is how much ALF might need to advance to get some developments to completion ... and whether these advances (if any) would have to come from new money.

Also looking forward reading between the lines it appears that recoveries from the Hangover assets are going into the business to be reinvested. That might piss the hangover equity holders off a bit as I'm sure many will think they should get some of this ... but then they need to realise that future money is needed to make more money so they can get theie money back quicker (from a higher ALF share price)

Then again these things might be more toxic than most think

Interesting times ahead for ALF but it will be a long slow grind

[Aeneas]

Agree with you about PGC before the recap. Now it has more free float than Cavalier, PRC etc.

My pick is that ALF will be down to 3c by the time the golden oldies panic out.

So to get into the NZX50 monthly index recapitalisation, done on the 3rd friday of the month, a stock needs to come into the index at at least 34th or better position.

Otherwise if the stock would get in in postions 35 - 49 it goes in at the 1/4ly review. Next one is March.

35th place looks to be a free float of about $250m at the moment, so as of right now ALF will go in in the 1/4ly review.

Whats PGW's free float?

[whatsup]

Perhaps I should have bolded this part for you:
...once assets have been recognised at a truly fair value.

A healthy finance company (i.e. one with "normal" level of loan recovery) usually trades at levels well above NTA backing.

Doesnt apply NOW!!!

[Silverlight]

PGW free float is less than 50% with Agria, PGC, & RPI owning strategic holdings

[Balance]

PGW free float is less than 50% with Agria, PGC, & RPI owning strategic holdings

PGW is already in NZX50.

You mean PGC?

[winner69]

maybe 10 cents was the bottom?

[Silverlight]

PGW has 758,445,684 with 381,498,179 (50.2%) being free float or $232m free float mkt cap. PGW shares from the right issue allot tomorrow

PGC has 773,521,841 with 672,317,447 (86.9%) being free float or $302m free float mkt cap. PGC has higher free float cap, but is not in the 50 either.

For ALF to get into the NZX50 it needs to be in 45th or higher at the quarterly review, or 35th in monthly, as Aeneas kindly mentioned.

[Doyle]

maybe 10 cents was the bottom?

Seems to have strong support at 10 cents. Not sure why though at that price you would have to believe around 70 cents in the dollar was recoverable. I'd say there are still plenty of sellers out there and new bottoms to be plowed, although looks like theres some serious buyers ready to mop them up at 10 cents.

IMO still a long way to go yet, current sellers are just the tip of the ICEBERG.

[winner69]

Doyle - doesn't current price suggest about 35 cents in the dollar?

[Baddarcy]

Seems to have strong support at 10 cents. Not sure why though at that price you would have to believe around 70 cents in the dollar was recoverable. I'd say there are still plenty of sellers out there and new bottoms to be plowed, although looks like theres some serious buyers ready to mop them up at 10 cents.

IMO still a long way to go yet, current sellers are just the tip of the ICEBERG.I think your last comment is spot on, most of the sellers are yet to hit the market i think, still organising themselves to trade. Give it a couple of days and i think we will see another drop in SP.

[Doyle]

Doyle - doesn't current price suggest about 35 cents in the dollar?

May have got a little carried away, if you take 70 cents subtract the 6 cents already received, and the discount it at 10% (pick a discount rate but this is high risk stuff so a resonable rate is necesary) over the four years it is expected to collect receiveables (and yes most the money will come in in the last 12 months) and you get 43 cents in the dollar or 12 cents per share.

AT 10 cents per share using a 10% discount rate expected total recevories are around 58 cents in the dollar. Forgive me I was doing the calculations in my head before hence being a fair way off. Obviously the key is the discount rate, Hanovers loan book could now only be described as junk bonds, so there is an argument that the discount rate used should be 13 or 15%. In which case it changes the odds quite considerably.

I ascribe a fair value range of 8-9cents a share, but thats based solely on the PWC report which is now out of date. And I also am picking they will be oversold so am picking the bottom will come at 5 cents, but todays trading does suggest that to be unlikely.

[777]

Well someone's interested. Price up to 13c. Above what I would think they would be worth.

[flyingfox]

So many speculators and such a risky game to play..when someone start to sell off it will be a big dive

[COLIN]

Still a huge potential volume of sellers to soak up. They say that "fortune favours the brave" but I'm certainly not going to tempt fate, at least at this stage.

[blackcap]

What have I missed with this whole saga fiasco?

Assuming that the Allied board did due diligence etc on Hanover etc they must have deemed it fair value at the price they paid for Hanover. They then vote on the issue (assuming shareholders are stupid and follow board recommendations) and it gets passed. Now 20 cents was being paid by investors just before ex date so that is deemed fair value.

Why does the Allied share price then drop like a stone after the event? I mean the directors of Allied are happy with the deal (they did it) and are happy with the price paid, and are also happy with the 20 odd cents per share paid.

Thus this 13 odd cent shareprice NOW is telling me either of 2 things. The market has no faith in Allied's board or new information has come out after the event that dilutes the value of Hanovers assets. I know some ppl have been discounting the 55 odd cents NTA etc but surely the Allied Board did precisely that as well to come to some sort of fair valeu NOW.

I know this may seem like rambling, but some things just do not add up and I cant get my head around it.

[Dr_Who]

Blackcaps

There are a number of unhappy investors with the ALF/HAngover deal. There are also a number of reasons why the sp is depressed.

1. GPG and a number of large investors have decided to dump the stock on the market, hence you are seeing a depressed sp. GPG have gone throu the Hangover toxic asset due diligence and must have thought it is total crap and decided to dump the stock.

2. The true value of the hangover toxic asset is worth much less than reported? Maybe. You can only look at how GPG dumped their stock to guess how much it is worth.

3. There is an over hang of potential sellers out there not yet receive their FIN number and do not yet have a broker to sell their allocation.

4. The market are not liking the deal and asking is ALF a rural stock, a finance company or what is it?

5. There are plenty of cheap finance company listed so why pay a premium for ALF?

Disc: not a shareholder

[blackcap]

Dr Who,

I know what you are saying but what you are saying also implies that the Allied Board are CRAP.

(because they will have known all of your comments made above before the event surely? And thus a share price collapse should not be justified if they are competent and astute........

Or am I missing something yet.

[Dr_Who]

Dr Who,

I know what you are saying but what you are saying also implies that the Allied Board are CRAP.

(because they will have known all of your comments made above before the event surely? And thus a share price collapse should not be justified if they are competent and astute........

Or am I missing something yet.

Alf have no choice but to take this deal or the banks would bring in the receivers. So, yes you are right, they are crap and have destroyed shareholders value. Have a look at ALF 10 year chart.

[blackcap]

Alf have no choice but to take this deal or the banks would bring in the receivers. So, yes you are right, they are crap and have destroyed shareholders value. Have a look at ALF 10 year chart.

So you are saying that if they didnt do the deal they would have collapsed? I cant hold onto this thought as before the whole deal etc the shareprice was above 30 cents and if they were going to collapse (continuous discloure) the shareprice would already have been below the 10 cent mark.

Or if they were not disclosing then other naughty things were happening.

But for me there is something funny going on. The shareprice immedialty prior and after the announcements and votes somehow do not make sense....

Not very good for Hanover debenture holders that is for sure..... from 20 cents (theoretically) a share to 13 in a short space of time.....

Surely it would have been better to pay cash for Hannovers assets and then maybe maybe some real value may have been found.

If the Allied Directors didnt discount the 56 cents over 5-6 years at 10% + then they have got a lot to answer for imho. But that said maybe they see more than 56 cents in these so called toxic assets.....

Whatever the story, if you have any faith in Allied Directors and management these shares must be a raging BUY at anything around the 10 cent mark.

[keepitsimple]

fear and greed often rules over all else and i think ALF are in the grip of fear and uncertainty share holders just need to sit tight and see how things work out,theres not much more to lose any way. GPG well we know there style you never no they may wait in the wings and step into a bargain.new year will be interesting

[Balance]

fear and greed often rules over all else and i think ALF are in the grip of fear and uncertainty share holders just need to sit tight and see how things work out,theres not much more to lose any way. GPG well we know there style you never no they may wait in the wings and step into a bargain.new year will be interesting

GPG?

Name one good investment of any consequence by GPG in the last 5 years outside of Tower?

Allied Framers is yet another disaster - adding to Capral, CSR etc.

[Balance]

Blackcaps

There are a number of unhappy investors with the ALF/HAngover deal. There are also a number of reasons why the sp is depressed.

1. GPG and a number of large investors have decided to dump the stock on the market, hence you are seeing a depressed sp. GPG have gone throu the Hangover toxic asset due diligence and must have thought it is total crap and decided to dump the stock.

2. The true value of the hangover toxic asset is worth much less than reported? Maybe. You can only look at how GPG dumped their stock to guess how much it is worth.

3. There is an over hang of potential sellers out there not yet receive their FIN number and do not yet have a broker to sell their allocation.

4. The market are not liking the deal and asking is ALF a rural stock, a finance company or what is it?

5. There are plenty of cheap finance company listed so why pay a premium for ALF?

Disc: not a shareholder


Which are the cheap finance companies to buy?

How do you know that ALF is trading at a premium?

Very interested in your assessments and analysis.

[COLIN]

So you are saying that if they didnt do the deal they would have collapsed? I cant hold onto this thought as before the whole deal etc the shareprice was above 30 cents and if they were going to collapse (continuous discloure) the shareprice would already have been below the 10 cent mark.

Or if they were not disclosing then other naughty things were happening.

But for me there is something funny going on. The shareprice immedialty prior and after the announcements and votes somehow do not make sense....

Not very good for Hanover debenture holders that is for sure..... from 20 cents (theoretically) a share to 13 in a short space of time.....

Surely it would have been better to pay cash for Hannovers assets and then maybe maybe some real value may have been found.

If the Allied Directors didnt discount the 56 cents over 5-6 years at 10% + then they have got a lot to answer for imho. But that said maybe they see more than 56 cents in these so called toxic assets.....

Whatever the story, if you have any faith in Allied Directors and management these shares must be a raging BUY at anything around the 10 cent mark.

Blackcap: There seems no doubt that Allied's financial position was in a precarious state before this deal. By their own reckoning - i.e. the values ascribed to their assets by the directors and their auditors (and we know how reliable such valuations can be!!!!!?????) - their total liabilities were barely covered by their assets. So, by issuing a whole swag of equity in exchange for assets of indeterminable worth (what value does one place on a poultice of Queenstown "upmarket" development properties in various stages of stunted progress?), the ALF directors have "saved" their company. Where this actually leaves their individual shareholders is an entirely different matter.

[blackcap]

Blackcap: There seems no doubt that Allied's financial position was in a precarious state before this deal. By their own reckoning - i.e. the values ascribed to their assets by the directors and their auditors (and we know how reliable such valuations can be!!!!!?????) - their total liabilities were barely covered by their assets. So, by issuing a whole swag of equity in exchange for assets of indeterminable worth (what value does one place on a poultice of Queenstown "upmarket" development properties in various stages of stunted progress?), the ALF directors have "saved" their company. Where this actually leaves their individual shareholders is an entirely different matter.

Colin, I can understand the reasoning of the directors (although if that is what they did then they would be in serious breach of the Coy Act 93) but then why the @#$& did the shareholders vote for the deal "knowing" that this would happen once the market was flushed with new shares.....

I just cannot work this one out.

Merry Christmas to everyone

[Steve]

Colin, I can understand the reasoning of the directors (although if that is what they did then they would be in serious breach of the Coy Act 93) but then why the @#$& did the shareholders vote for the deal "knowing" that this would happen once the market was flushed with new shares.....

I just cannot work this one out.

Merry Christmas to everyone

It keeps their Directors fees rolling in. Not to mention with the increase in net assets, they could be in line for an increase in Directors fees in the near future... :eek:

[Lizard]

There's a bit of paperwork out there on ALF and Hanover, but I'm having trouble finding a couple of relevant bits and wondering if anyone can point me in the right direction:

1. Hanover 2009 accounts
2. Grant Samuels report on the transaction

Thanks in advance if able to help.

[Lizard]

Found the accounts - only in a messy cached version though, since hanover appear to have deleted all from their website (not just the links) and also not filed with the Companies Office yet.

If anyone else wants them, go to this cached link (probably not going to work for long!) and then print to pdf form/save. Messy, but better than nothing.

Hanover 2009 Financial Statements (http://74.125.155.132/search?q=cache:_3nLkxKmjcoJ:www.unitedfinance.co.n z/uploads/pdfs/HFL%2520Financial%2520Stmts%2520June%25202009.pdf+ site:unitedfinance.co.nz+%22hanover+finance%22%2B2 009%2Breport&cd=6&hl=en&ct=clnk&client=safari)

[Lizard]

Some comments on the quality of Hanover assets as at 30 Jun 2009:

Out of a value of $271.2m:
1. $52.5m neither past due nor unimpaired. Of these, $23.1m are category 1 (risk of loss remote or unlikely)
2. $21.3m are in arrears but not impaired - of which $16.7m is an "arrears component" (additional fees for arrears?)
3. $197.5m is the value of impaired loans - gross value $360.4m with $162.9m of impairment allowance. The impairment allowance is calculated using a discount rate, so there remains $57.7m which will be reversed (a gain) as interest income in future years if recoveries meet expectations.

Also note that $137.1m of loans were written off in 2009 financial year (additional to impairment).

Note that the ALF deal values the Hanover loan book at $301.8m, so probably allows for some additional accrued interest beyond that showing at June 09 and perhaps some partial reversal of the $57.7m?

[Lizard]

The ALF assets have perhaps not been written down as harshly as the Hanover ones. At 30 Jun 09, they had the following make-up of loan assets:

Of $271.6m of loans:
1. $235.8m are classed as standard performing - probably about $215.1m are similar category to Hanover low risk loans, while $20.7m are being monitored.
2. $21.4m are past 90 days overdue. However, Hanover includes all overdues in this category - total past due but not impaired for ALF is $48.7m.
3. $9.6m is impaired.

Remainder ($4.8m) unclear but probably in collective impairment and asset impairment amount.

An additional $8.5m was written off in the 2009 year.

Of the $271.6m, a significant portion ($142.2m?) was securitised under an arrangement with Speirs Securities Ltd, with ALF receiving a fee. This seems to comprise mostly good quality, short term loans.

[troyvdh]

3 questions
1-do you think that GPG read the same page(s) as you
2-how was xmas for you and yours
3-do you own any ALF

[Lizard]

3 questions
1-do you think that GPG read the same page(s) as you
2-how was xmas for you and yours
3-do you own any ALF

1. Would have to think so.
2. Good, how was yours?
3. No - just considering it.

Hope that helps :)

[Steve]

Do you see any chance of GPG will buy back in following the 're-adjustment' in value of the shareprice?

[brucea]

I cannot resist passing this on and forgive me if someone else has posted this already; a friend of mine who had most of his savings invested with this company wittily refers to them as "Handover" ....

[Dr_Who]

Do you see any chance of GPG will buy back in following the 're-adjustment' in value of the shareprice?

GPG are usually long term investors and not short term traders. There is a good reason why they dumped the shares prior to the hangover deal.

[Lizard]

I just noticed that the Hanover Finance Limited accounts are now available from the companies office. These vary from the Charging Group accounts which Hanover debenture holders would have received earlier (not now available on line as far as I know).

I don't entirely understand how the charging group accounts are made up vs HFL accounts, but I think they de-consolidate the likes of United Finance and possibly other entities. (Any explanation from accountants appreciated!).

One thing I don't understand though is how the amount of "net loans and advances" is lower in the HFL accounts than in the charging group accounts - surely should be higher if includes UFL? Also, not sure how HFL ends up with $92m of property assets (from debt restructuring) and whether these ended up retained by Hanover?

[Aeneas]

So to get into the NZX50 monthly index recapitalisation, done on the 3rd friday of the month, a stock needs to come into the index at at least 34th or better position.

Otherwise if the stock would get in in postions 35 - 49 it goes in at the 1/4ly review. Next one is March.

35th place looks to be a free float of about $250m at the moment, so as of right now ALF will go in in the 1/4ly review.

Whats PGW's free float?

So pgc makes it in this month - that will make you happy Balance.

ALF will go in in March now.

[Silverlight]

Security MCAp Rank
FBU -- $ 4,939,865,245.25 -- 1
TEL -- $ 4,735,880,552.50 -- 2
CEN -- $ 3,634,839,629.82 -- 3
AIA -- $ 2,340,978,586.49 -- 4
SKC -- $ 1,909,380,760.84 -- 5
SKT -- $ 1,705,880,448.30 -- 6
FPH -- $ 1,703,589,831.54 -- 7
GPG-- $ 1,191,446,661.46 -- 8
RYM -- $ 1,080,000,000.00 -- 9
WBC-- $ 979,564,864.00 -- 10
IFT -- $ 943,339,414.96 -- 11
KIP -- $ 843,321,739.05 -- 12
GMT -- $ 767,230,852.50 -- 13
GFF -- $ 764,362,609.56 -- 14
ANZ -- $ 631,372,645.18 -- 15
NZO -- $ 626,318,290.92 -- 16
APT -- $ 623,416,933.37 -- 17
NPX -- $ 582,677,489.96 -- 18
APN -- $ 530,627,566.98 -- 19
FRE -- $ 523,749,265.60 -- 20
VCT -- $ 487,062,603.23 -- 21
MFT -- $ 456,487,059.84 -- 22
POT -- $ 425,448,747.00 -- 23
TWR -- $ 388,630,856.25 -- 24
TPW -- $ 381,767,933.50 -- 25
FPA -- $ 370,808,403.20 -- 26
WHS -- $ 353,778,506.78 -- 27
AMP -- $ 346,888,891.90 -- 28
PGC -- $ 315,616,266.24 -- 29
AIR -- $ 311,598,207.18 -- 30
ING -- $ 289,361,333.51 -- 31
EBO -- $ 272,437,322.56 -- 32
PPL -- $ 255,468,633.93 -- 33
PFI -- $ 253,161,338.26 -- 34
PGW -- $ 247,973,816.35 -- 35
SAN -- $ 237,789,020.40 -- 36
PRC -- $ 200,264,260.20 -- 37
NZR -- $ 157,936,314.55 -- 38
RAK -- $ 140,524,851.96 -- 39
KMD -- $ 134,023,268.00 -- 40
IMP -- $ 110,559,173.70 -- 41
HLG -- $ 103,136,658.00 -- 42
RBD -- $ 96,462,233.00 -- 43
MHI -- $ 93,048,315.86 -- 44
STU -- $ 85,796,449.56 -- 45
CAV -- $ 80,059,173.72 -- 46
TLS -- $ 71,492,316.00 -- 47
NZX -- $ 66,481,840.56 -- 48
NZS -- $ 45,417,421.50 -- 49
PPP -- $ 42,443,097.83 -- 50


ALF @ 11.3 cents with 1,952,294,858 shares gets 220m MCap so 37th position and will probably push PPP or NZS out.

Imagine if NZX got pushed out.

[777]

Silverlight I have been looking for market capitalization lists but unable find. Where did you get yours from? NZX did not understand what I was asking for. Thanks.

[Balance]

So pgc makes it in this month - that will make you happy Balance.

ALF will go in in March now.

There is a liquidity test as well?

[Silverlight]

Email data@nzx.com, ask them for a copy of the current indexed shares for the nzx50.

You then just have to fill in the prices and times shares by price. Wahlah free float market caps. They will probably give it to you free, but state they may charge next time.

If you mention you are a student and using the information for academic purposes they will provide most stuff without asking though.

[777]

Email data@nzx.com, ask them for a copy of the current indexed shares for the nzx50.

You then just have to fill in the prices and times shares by price. Wahlah free float market caps. They will probably give it to you free, but state they may charge next time.

If you mention you are a student and using the information for academic purposes they will provide most stuff without asking though.

Thanks Silverlight

[GTM 3442]

There is a liquidity test as well?

Nah ! This is New Zealand.

[Dr_Who]

Blackcaps

There are a number of unhappy investors with the ALF/HAngover deal. There are also a number of reasons why the sp is depressed.

1. GPG and a number of large investors have decided to dump the stock on the market, hence you are seeing a depressed sp. GPG have gone throu the Hangover toxic asset due diligence and must have thought it is total crap and decided to dump the stock.

2. The true value of the hangover toxic asset is worth much less than reported? Maybe. You can only look at how GPG dumped their stock to guess how much it is worth.

3. There is an over hang of potential sellers out there not yet receive their FIN number and do not yet have a broker to sell their allocation.

4. The market are not liking the deal and asking is ALF a rural stock, a finance company or what is it?

5. There are plenty of cheap finance company listed so why pay a premium for ALF?

Disc: not a shareholder

The writing was on the wall.

[Dr_Who]

Here comes 5 cents?

[Alan3285]

Hi Dr_Who,




Here comes 5 cents?




What is your analysis behind 5 cents?

Thanks,

Alan.

[minimoke]

Hi Dr_Who,


What is your analysis behind 5 cents?

Thanks,
Alan.
Oh -and if you wouldn't mind while you're at it. What would an orginal depositer with Hanover (with say $1,000) be worth today.

Meanwhile Mr Watson and Hotchins continue smiling with their $10m bonus. I guess ALF can say good bye to any Index listing so ALF holders will loose even more (we saw an approx 20% appreciation of ALF when their listing was confirmed)

[Balance]

Hi Dr_Who,




What is your analysis behind 5 cents?

Thanks,

Alan.

Dr Who has been right so far ... so 5 cents it is!

[minimoke]

Dr Who has been right so far ... so 5 cents it is!
But in the meantime there are those prepared to grab hold of the falling knife. Looks like the mums and dads are quitting for what they can. Down 20% so far on opening - and they are now going to be learning about broker fees's and wondering where their Hanover money went.

[Alan3285]

Dr Who has been right so far ... so 5 cents it is!

Another illuminating post Balance.

[Alan3285]

Hi Minimoke,


Oh -and if you wouldn't mind while you're at it. What would an orginal depositer with Hanover (with say $1,000) be worth today.

Meanwhile Mr Watson and Hotchins continue smiling with their $10m bonus. I guess ALF can say good bye to any Index listing so ALF holders will loose even more (we saw an approx 20% appreciation of ALF when their listing was confirmed)


Don't quote me on this - others may be able to improve on the analysis.

However, I understood the investors were getting 22c per share (at valuation).

That was based on 72c recoverable from their original 100c investment.

If the shares are worth 10c today then:

10/22 x 72 = 33c in the dollar or $330 for their original $1,000.

If the shares are worth 5c today then $165 per $1,000.


Anyone able to improve on that?

Alan.

[Dr_Who]

Hi Dr_Who,




What is your analysis behind 5 cents?

Thanks,

Alan.

No analysts, just common sense. Still dont understand why anyone would pay a premium to the NTA in a stock with such high risk.

[yabster]

Looks about right Alan.

Another kick in the guts for the Hanover investors. Puts a huge question mark on current ALF management too- stupid stupid stupid.

In the meantime Eric and Mark continue on with there richlist lifestyles.

[Alan3285]

Hi Yabster,




Looks about right Alan.

Another kick in the guts for the Hanover investors. Puts a huge question mark on current ALF management too- stupid stupid stupid.

In the meantime Eric and Mark continue on with there richlist lifestyles.




I'm not entirely sure about that.

It depends on whether you think the Hanover assets were actually worth 72c in the dollar at the time of the deal.

If they were actually worth about half, then a share price of 11c is actually quite fair. If they were worth a quarter, then anything over 5.5c is a good deal.

I don't know of course, just pointing out that it seems unlikely that the Hanover assets have actually declined in value by 50% in three months - not impossible though!

Alan.

[minimoke]

Hi Minimoke,


If the shares are worth 10c today then:

10/22 x 72 = 33c in the dollar or $330 for their original $1,000.

If the shares are worth 5c today then $165 per $1,000.


Thanks for that Alan

So to recap, when things turned to custard Hanover was going to give back $1.00 over five years – and the Dums and Mads bought it.

It was only back in early November 09 that Hanover reckoned depositors were now only worth $0.70 cos Hanover was worth $554m and the Dums and Mads were a bit nervous – but no doubt happy their hard earned investments hadn’t turned to nothing like Bridgecorp..

Allied and Hotchin spruiked the deal in late November bringing $0.78 to depositors and the Dums and Mads were happy to make an extra $0.08.

Just before Christmas the Dums and Mads saw 30% shaved off the deal when the extra shares came to market.

February sees the NZX suggesting to the privileged few that ALF would go onto the Index and there’s a 20% rise. Oops – a few days later NZX made a mistake - there goes that 20%.

So Hanover assets are now worth $175m and the Dums and Mads could get $0.165 (less brokerage fees) if ALF goes to $0.05.

And we now have a government seriously wondering why NZ’ers prefer property to equities. Can’t figure why!

[whatsup]

Soggy soggy

[yabster]

Good summary Minimoke.

Can't see any off those Mums and Dads investing in the NZX after this can you? Mark Weldon should never have been on that Tax group- huge conflict of interest- of course he wants everyone to invest in the NZX. He should look at his own backyard for reasons why people invest in property - the ALF index issue being a prime example- all weighted towards the big boys- the minnows just get swallowed up an spat out.

[Alan3285]

Thanks for that Alan

So to recap, when things turned to custard Hanover was going to give back $1.00 over five years – and the Dums and Mads bought it.

It was only back in early November 09 that Hanover reckoned depositors were now only worth $0.70 cos Hanover was worth $554m and the Dums and Mads were a bit nervous – but no doubt happy their hard earned investments hadn’t turned to nothing like Bridgecorp..

Allied and Hotchin spruiked the deal in late November bringing $0.78 to depositors and the Dums and Mads were happy to make an extra $0.08.

Just before Christmas the Dums and Mads saw 30% shaved off the deal when the extra shares came to market.

February sees the NZX suggesting to the privileged few that ALF would go onto the Index and there’s a 20% rise. Oops – a few days later NZX made a mistake - there goes that 20%.

So Hanover assets are now worth $175m and the Dums and Mads could get $0.165 (less brokerage fees) if ALF goes to $0.05.

And we now have a government seriously wondering why NZ’ers prefer property to equities. Can’t figure why!


As I said, there might be something missing from those calculations I gave - I don't have all the information to hand, but I'm sure others here will improve on it if possible.

An alternative view on what happened:




The fundamental issue perhaps is that all those finance company investors were being greedy.

They were offered 14% in 'first ranking debentures' by the finance companies, and were greedy enough to believe that they knew better than the big boys (Westpac, BNZ, ANZ - whoever) as to what return should be required from those finance companies.

You can be damn sure they wouldn't have been bleating if it went right and they got their 14% any more than they're bleating right now about their great property investments they've been forced into.

Sheer arrogance on the part of those M&D investors - they deserve what they got.




Depends on your point of view I suppose.

Alan.

[minimoke]

No analysts, just common sense. Still dont understand why anyone would pay a premium to the NTA in a stock with such high risk.Well we have a NTA of $0.776. So what might those risks be.

First we have a Chairman who reckons Hanover has strengthened ALFs position - todays 14% fall is testament to that.

You have exposure to the rural sector - and this will be impacted on SCF's management and outcome, the $NZ/$USD, sheep and wool demand, feed reserves, dairy commodity price fluctuations and global cooling.

Then of course there is the Hanover and United millstones. Further writedowns are on the cards, you've got ongoing operational costs (with the highly skilled and paid finance and legal team - they reckoned they were better than GPG at valuations and got the purchase price right didn't they?), ongoing litigation as well as Kawerau Stages 2 and 3 exposures.

Now the bright spots on the horizon that would justify a premium are........

[CJ]

No analysts, just common sense. Still dont understand why anyone would pay a premium to the NTA in a stock with such high risk.

Didn't I see NTA was about 7c. In which case allow 2c to collect (and further writeoffs) and 5 seems about right.

[777]

Facts

$100,000 owing by Hanover.
Revalued to $78,000.
$6,000 had been repaid in cash.
Therefore $72,000 was value of investment that shares were issued for.
Value of ALF shares used was .20693281

Therefore shares issued were 347,939

Value of shares @ 5c is $17,396.95
Cash already returned was $6,000.00
Therefore $23,396.95

Put simply 23.39695% of original amount owing.

Of course no interest was paid for 18 months before the settlement occurred.

[minimoke]

Depends on your point of view I suppose.

Alan.
I have some sympaty with the "greed" side of the argument. Though I prefer to lean towards the average investor being pretty dumb and easily sucked in by celebrity faces and other non-financial fluff. Tie that with great returns and its not hard to see how the great pond of gullible punters are easily parted with their loot.

[Logen Ninefingers]

The thinking that these were greedy investors who deserve to be duped is warped and dangerous - it's that thinking that virtually vindicates what Hotchin & Watson have done, and it's that thinking that stops us from demanding - as a society - better treatment of investors by institutions and companies. If the aim of investing is to ensure the best possible return on your money, rather than simply putting it in the bank, then what sympathy should anyone recieve in any situation where they invest in a company that is later affected by management corruption & dark deals. It's this kind of antipathy to these situations - basically 'let the buyer beware' - that allows companies of all kinds to treat shareholders with contempt. I would have thought that most sympathy would be with investors; instead it seems to be "fools, we're smarter than them" or "that's the reality of business". If the 'greed is good' ethos prevails here where everyone is seeking maximum return, why therefore ridicule M&D / elderly investors who were also apparently motivated by 'greed'. Remember, these people probably worked damn hard for their money in the first place.

[minimoke]

The thinking that these were greedy investors who deserve to be duped is warped and dangerous
I also have difficulty labling those seeking a higher return as "greedy" and they certainly don't deserve to be duped - lets face it, in NZ thats like fishing in a pond with dynamite - wheres the sport in that!.

Investors have an obligaiton to seek the best return they can - but that return is tied to risk. The more you want the greater risk you have to be prepared to take. Hence I have little sympathy for the current Hanover investors. The writing was on the wall a long time ago but time after time they allowed themsleves to be dazzled by promises that could not be met. At some point I reckon we'll see a research paper showing the relevance of Stockholme Syndrome to our financial markets.

[Dr_Who]

They (and others) got a get out of jail free card.
Investors got shafted, yet again.
Questions over ALF intentions backing toxic asset into another toxic asset at a premium.

NZers continue to love properties over equities. Changes property tax will not encourage NZers to invest in equities.

[Logen Ninefingers]

Risk is fine, but at the same time risk should be related to the risks any business operates under, with certain businesses necessarily having more risk relating to what sector of the economy they operate in. What we need to be careful of is saying "this company was offering a high rate of return, therefore there's a risk that the people running it may be involved in stripping money out of the company, doing dodgy (related party) deals with themselves & their mates, investing in long-shot's etc". This kind of stuff should not go unpunished just because investors should / should not be aware of an element of risk. If that's the case, it's just giving a new crop of crooks a blank cheque to do the same thing.
.....And then there's the risk that a company will vastly overstate the assets of the devastated company they are seeking to control, in order to dupe investors (including their own shareholders) into gaining control, then 2 months later turn around and say that the assets are actually worth half what they stated they were worth. This kind of behaviour will have potential investors flocking back to property and the bank.

[minimoke]

...deals with themselves & their mates, investing in long-shot's etc". This kind of stuff should not go unpunished j
I'm not so sure about punishment - some investors are, frankly, so thick why would you want to punish a promoter. Take for example Huljich. Here you have people who flocked to this Kiwisaver fund in preference to some long established players. I have no problem with that. But now we have Hujich putting his own money in to inflate the returns - I have problems with that. I also have problems with Huljich buying so heavily in NEW. But thats his right and its well reported. With Kiwisaver you can swap providers with a stroke of a pen - but how many Kiwisaver investors do you reckon are still in Huljich today. Heaps I'd suggest - and I have no sympathy for them either. What sort of red flags do investors need to look at their investment decisions.

[minimoke]

The thinking that these were greedy investors ..... virtually vindicates what Hotchin & Watson have done,
Actually teh Hanover invesotrs did vindicate Hotchin and Watson. Afterall they gifted the two of them $20m

[Balance]

Actually teh Hanover invesotrs did vindicate Hotchin and Watson. Afterall they gifted the two of them $20m

Plus all the cheap credit for them to speculate with in property developments in the last 10 years.

[CJ]

The problem was the risk reward ration wasn't suitable. The people you should feel sorry for are those that paid an advisor who didn't do their job properly. Those how invested themselves obviously didn't do enough research or merely trusted the market.

[Balance]

The problem was the risk reward ration wasn't suitable. The people you should feel sorry for are those that paid an advisor who didn't do their job properly. Those how invested themselves obviously didn't do enough research or merely trusted the market.

Good point, CJ.

Trusted the market - more like getting sucked by Richard Long. Just like those in Provincial were sucked in by Colin Meads.

[Logen Ninefingers]

I guess that should be sucked in by Richard Long.

[Balance]

I guess that should be sucked in by Richard Long.

Good catch, LN.

Maybe getting mugged by Hanover due to the suction power of Richard Long may be more appropriate description?

[Steve]

Who did the original independent valuation report on the Hanover assets at the time that investors voted?

[minimoke]

Who did the original independent valuation report on the Hanover assets at the time that investors voted?
Grant Samuels. The deal was "superior to the status quo"

Prior to that there was PWC who reckoned the Moratorium was the way to go because Hotchin and Watson were going to put money in - and despite Hanovers loan recovery forecasts being a bit optimistic.

But back to Grant Samuels - at the time Guardian Trust (trusteee for debenture holders) reckoned investors woudn't get $0.72 from the Allied deal - but they were as far as I recal silent on what investors could realistically expect.

[bull....]

The shares may be only a couple of cents if the transaction goes thru thats why GPG dumped better to get some money out than none.
Will the NZX investigate a 50% fall in price in a day after the transaction gos thru, if it does?

Who would have thought