There is always hope :-)
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There is always hope :-)
Looks like the loans acquired with the Hanover assets (that they failed to clearly mention in the paperwork to investors) are coming back to roost. Seems at least one $19m loan against Matarangi Beach is with HSBC and has been called in. Seems Matarangi was a net value $26m of the support package, last recognised at $7m net of debt and now likely to be somewhat less...
It seems to me that presenting the support package assets at net value as part of the deal without making clear those values included debt facilities and outlining the terms was misleading. Especially so in assembling a pro-forma balance sheet that simply showed the net value rather than asset/liability components that clearly had to be consolidated.
More evidence suggesting that Hanover debenture holders would likely have been better off under a liquidation.
No surprises there Lizard.Yes I think the Hanover debenture holders would have been better off under liguidation.The liguidator would have gone after the 'givers' of the 'support package'.May have even encuoraged the 'givers' to find their cheque books.!!! Now that would have been fun.
Some strong words in the latest ALF release as Matarangi Beach Estates goes into receivership. The blame game is probably of no help to former Hanover debenture holders - after all, it was ALF who issued the prospectus to them offering shares in ALF. And it is difficult to say that ALF has suffered from the transaction - even if it hasn't turned out to be the miracle outcome it was portrayed as. ALF has still managed to use proceeds realised from Hanover assets to pay down it's own pre-existing debt, while making sure that it's own pre-transaction shareholders had the protection of the shortfall calculation. There was no equivalent benefit for Hanover investors who, with the loss of ANF and other ALF-related write-downs, are probably in negative on what they received from ALF.
Quote:
Allied Farmers Limited Managing Director, Mr Rob Alloway said "it seems
obvious to us that the value of these assets in the audited 30 June 2009
financial statements, on which Hanover debenture holders were entitled to
rely at the time of acquisition, was unrealistic, as there is no way that the
market for this type of asset has deteriorated that much in such a short time
frame".
"This is an unfortunate trend we have seen with most of the property and loan
assets that were acquired, and further calls into question the real value of
the shareholder support package contributed by Messrs Hotchin and Watson at
the time of the Hanover moratorium. The investment community should have
expected far better oversight of the moratorium from Hanovers directors,
valuers, trustees and auditors".
Mr Alloway said "it is also disturbing to us that in the days leading up to
the receipt of the repayment demand from HSBC, we were, with the knowledge of
HSBC, approached by Mr Kerry Finnigan, representing an entity owned by Messrs
Hotchin and Watson, proposing a purchase of the MBEL assets for the loan
value of circa $19 million.
"Investors can draw their own conclusions as to whether it was a coincidence
that when we refused to sell the asset back to Hotchin and Watson, HSBC, who
in Mr Finnigan's own words have a "strong relationship" with Hotchin and
Watson entities (HSBC banks both Bendon and Cullen Investments), immediately
moved to demand repayment. The HSBC loan on MBEL we understand is also still
guaranteed by entities associated with Hotchin and Watson".
"The directors of MBEL will be keeping a close eye on any likely sales
process by the Receiver to ensure the best value is achieved for the asset
for the benefit of our shareholders. We would be disappointed if it turned
out that HSBC's demand for repayment was simply designed to enable the return
of the asset to Hotchin and Watson interests at a vast discount to the value
they transferred it to us in just November last year".
Good stuff eh!?
I just came across this excellent Dominion Post article by Tim Hunter (dated 13 August) that I hope they won't mind being copied here as it makes for a fairly good summary on the debt issues (though doesn't make clear that they remain non-recourse to ALF):
I doubt ALF was as naive about the valuations as they would like to appear - PWC cautioned on the valuations on pg 60 of their 2008 report at the time of the debt restructuring. Surely ALF's own due diligence would have established the loan situation. And, naturally, ALF were not willing to extend any additional security to the loan that might have enabled a re-financing of the loan, thereby avoiding receivership.Quote:
Allied Farmers moves deeper into repayment mire
BY TIM HUNTER - The Dominion Post
Last updated 10:08 13/08/2010
OPINION: As Allied Farmers twists and jerks on the gibbet of its desperate cash shortage, the figure of Mark Hotchin can be imagined watching from the front row, knitting.
Released from the onerous obligations of Hanover Finance when Allied bought its assets, he can afford to be a bystander, although one who knows more than most how long Allied can survive the noose without succour.
When defunct Hanover offered investors a moratorium deal in November 2008, Mr Hotchin made much of a shareholder support package in which he and business partner Eric Watson transferred property to Hanover and its sister United Finance. Those assets were worth $66 million, he said. Add in cash commitments and the pair were tipping $96m of their own into the pot for the benefit of investors owed more than $500m.
The real value of that property was queried at the time, but Allied is now discovering its inclusion in the deal was as supportive as throwing a drowning man a lead- filled lifejacket.
Why? Because the Hanover property came with debt that is eating up cash.
At the time of the moratorium, it took careful scrutiny of the scheme's documents to glean much information about the debt attached to the shareholder support. The properties transferred were in the Axis group of companies and comprised land and developments at Matarangi Beach Estates in the Coromandel, Clearwater Resort in Christchurch and Jacks Point in Queenstown.
They were collectively valued at $40m with a further $26m in a second-ranking loan to Matarangi Beach Estates. The $40m was a net figure, calculated by subtracting the debt owed on the properties from their apparent value, but how much debt was owed and to whom was not made clear.
When Allied bought the Hanover and United assets, the debt was thought so insignificant it barely warranted a mention in the offer documents. A table detailing what Allied was buying gave liabilities as zero, while assets were $396.2m, including the Axis companies as worth $34m.
It's likely many Hanover investors would have believed this was true - that only assets were being transferred and they had no residual liabilities to worry about.
But there was a hint of warning in a letter from Hanover chairman David Henry to investors last November. He said Allied could be a better prospect because it would have: "An ability to pay down the first mortgages over the Axis property assets transferred under the debt restructure support package, which otherwise cause increased pressure on cashflow and the realisation programme for these assets."
Investors should have already been aware the Axis properties could be worth nothing, but this was the first time they had been told the debts could be bleeding precious cash. Details of the debts were not provided by Hanover until it published its 2009 financial statements four months ago.
There was $21.2m owed to a bank by Matarangi Beach Estates, $11.4m owed to a bank by Lifestyles of New Zealand Queenstown and $4.4m owed to a bank by Clearwater Hotel. All the loans were in breach of their bank covenants, and since December, those debts are on Allied's balance sheet, not Hanover's - nor that of Messrs Hotchin and Watson. They make a big difference.
Allied has been struggling to renegotiate its debt to Westpac for $19.5m, a facility that was due for repayment in July but has been extended to next March on the understanding Allied will raise capital and restructure.
Its debt on the Hanover properties is much bigger at $30.8m. As of December, all of it was classed as due within one year. After yet another asset writedown it is apparent Allied is in no better position to pay down those first mortgages than Hanover was - or, presumably, Messrs Hotchin and Watson were before the moratorium deal.
"Thanks for nothing," Allied's shareholders might say. Click clack, say the knitting needles.
Probably for the best - though from ALF's point of view, perhaps it is okay to get another $7m written off the value of the Hanover assets rather than take any risk to preserve the value? The holders of the bonus shares (i.e. pre-transaction ALF holders) will get compensated via the shortfall calc anyway.
Taking MBEL as an example, I have no real issue with the disclosing it as an asset only (setting aside the actual valuation attributed which was recently $7m I think).
The debt within MBEL was and could never become a liability to ALF itself, and hence the minimum 'value' of MBEL to ALF was zero.
If they had disclosed it as, say, $26m of assets and $19m, then it would imply the maximum downside is $26m - that would have been misleading I think?
Alan.
Any positive implications for Allied Farmers?
http://www.stuff.co.nz/business/indu...h-Court-action
As for Hotchin saying that he is unaware what the hearing is about - he must be kidding, right?
belg. if someone was to buy the ailing alf or even merge, what wld that do for the sp. i was going to take a punt given i cant seem them just letting this sit there
Hi evilroyrule, did you end up taking a punt? It seems that very little is going on at the moment.
Does anybody have an idea of how a merger or t/o would affect the sp?