ALF - Allied Farmers Limited

[Out to lunch]

Any snipits you can post from the article? Is Hendo's name mentioned anywhere?

Article is on NBR online. Hendo is not a defendant in the ruling.

I like doing the valuation on this company, you've got a relatively negative outlook while there is also a positive lump sum contingent asset. Its like the opposite of FPH.

[Lola]

Article is on NBR online. Hendo is not a defendant in the ruling.

I like doing the valuation on this company, you've got a relatively negative outlook while there is also a positive lump sum contingent asset. Its like the opposite of FPH.

Got a guess or any insight as to what this windfall might mean for ALF? PWC settlement wouldnt have been chicken feed to start with.

[Out to lunch]

Got a guess or any insight as to what this windfall might mean for ALF? PWC settlement wouldnt have been chicken feed to start with.

The unknown factors are:
1) ALF's percentage cut of net proceeds under the Deed of Assignment
2) PwC settlement sum
3) Directors settlement or claim under the courts
4) LPF's costs- they're probably incentivised to not have max net proceeds, try and falsely increase the costs (google Hollywood Accounting).

So to calculate ALF benefit: 1 * ((2+3)-4)
My val has this at: 10% * ((20m+0m)-5m) = $1.5m, and no tax impact.

Let me know if I am missing something or my assumptions seem wildly out - at least its a base for sensitising return.

[Lola]

The unknown factors are:
1) ALF's percentage cut of net proceeds under the Deed of Assignment
2) PwC settlement sum
3) Directors settlement or claim under the courts
4) LPF's costs- they're probably incentivised to not have max net proceeds, try and falsely increase the costs (google Hollywood Accounting).

So to calculate ALF benefit: 1 * ((2+3)-4)
My val has this at: 10% * ((20m+0m)-5m) = $1.5m, and no tax impact.

Let me know if I am missing something or my assumptions seem wildly out - at least its a base for sensitising return.

We know 1. is 5 % publicly available info.
2. we dont know but the claim is for $302 million plus interest.
3. we dont know but PWC settled . Remember they had already lost in three courts so obviously didnt want to roll that dice again. Could be 20 to 50 million.
3. Agree

So my guess based on above plus ALFs own statement a while back that indicated they expected "substantially "more than what they had received to date for selling the loans in the first place which was $100,000

So range of 1m to 2.5 m

[Vaygor1]

So to calculate ALF benefit: 1 * ((2+3)-4)
My val has this at: 10% * ((20m+0m)-5m) = $1.5m, and no tax impact.

Let me know if I am missing something or my assumptions seem wildly out - at least its a base for sensitising return.

Further to Lola's response, bear in mind that there are 2 'tranches' to ALF receiving money from this litigation process. They are outlined in my ST post here:
https://www.sharetrader.co.nz/showth...l=1#post663892

I am trying to keep $0.00 in my emotional bank regarding both tranches, certainly the 2nd tranch. For the 1st tranch though, underneath I do expect something, just don't know the quantum.

The example used before the courts (and is public information) by PWC's lawyers is as follows. The 3rd column is my notes and represents my current understanding which could be flawed.

Claim (Resolution Sum)	$334,000,000	This number subject to interest rate penalty and for this table assumes it to be 0.00%
Less Project Costs (say)	$3,000,000
Net Resolution Sum	$331,000,000
SPF Services Fee 42.5% of the Net Resolution Sum	$140,675,000
Less Liquidation costs (say)	$2,000,000
The Net Amount – Available to PVL Creditors	$188,325,000	ALF get 5% of this amount for the 1st tranch (the Assignment Fee). Under this example it represents $9.42 million
Distribution of Net Amount
To SPF as 1st Secured Creditor	$188,115,226
Other Creditors	$209,774

The last real variable for tranch 1 is the interest rate. I have looked at cases in the past regarding this type of litigation and do not think 8%/annum compounding is unreasonable at all. Ignoring the table above for now (which except for column 3 was put together by PWC's lawyers), the original amount filed against PWC in 2013 was $302 million.

So 8% compounding on $302 million from 2013 equals $445 million in 2018
Using the remainder of the table above, this hypothetical scenario brings ALF's tranch 1 from $9.42 million to $12.6 million (unless I have slipped a decimal point somewhere).

[percy]

Vaygor1.
Spot on...Divie.....!!!!!

[blackcap]

Vaygor1.
Spot on...Divie.....!!!!!

not much... but imputed and a start

[Leftfield]

Yee ha! well done holders. Only 1% of my portfolio but nice to have this divi plus further positives to come for patient holders.

[Vaygor1]

Thanks Percy, Blackcap, and Left Field.

Positive news indeed !!

The announcement indicates to me the H1 forecast for this financial year is healthy enough to warrant this payment without too much risk of reducing their free cash-flow.

Will be interesting to watch the SP over the next week or three.

[Vaygor1]

Further to my post about 4 weeks ago (here.... https://www.sharetrader.co.nz/showth...l=1#post691896 ) on the potential amount ALF might receive as the Assignment Fee via the LPF litigation process, I have since learned the penalty interest rate as per the loan contract in question is specified as 1.5% per month with monthly rests (i.e. compounding monthly).

My example from 4 weeks ago used 8% per annum as the penalty interest rate but 1.5% compounding monthly equals 19.56% per annum.

Using the 19.56% per annum penalty interest, I calculate a potential award of of $302 million in 2013 equates to $737 million in 2018. If this is the amount awarded, and running it through the table as per my post from 4 weeks ago, ALF would receive $21 million as their 5% Assignment Fee.