ALF - Allied Farmers Limited

[Balance]

Allied Farmers' auditor refuses to give opinion on accounts

Tick, tick, tick.

ALF
08/10/2012 15:16
GENERAL

REL: 1516 HRS Allied Farmers Limited

GENERAL: ALF: ALF has received a request for payment of $500,000 loan due

Allied Farmers Ltd (ALF) has received a request for payment of a $500,000
loan due.

This loan had been scheduled to be repaid from the proceeds of the underlying
asset due in November 2012.

Allied has requested an extension of time from the lender to coincide with
the realization of the underlying asset. This seems a sensible solution for
both the lender and borrower.

However in the event an extension is not granted that would result in an
enforceable event of default under ALF's secured loan facility.

Chairman of Directors

[digger]

Tick, tick, tick.

ALF
08/10/2012 15:16
GENERAL

REL: 1516 HRS Allied Farmers Limited

GENERAL: ALF: ALF has received a request for payment of $500,000 loan due

Allied Farmers Ltd (ALF) has received a request for payment of a $500,000
loan due.

This loan had been scheduled to be repaid from the proceeds of the underlying
asset due in November 2012.

Allied has requested an extension of time from the lender to coincide with
the realization of the underlying asset. This seems a sensible solution for
both the lender and borrower.

However in the event an extension is not granted that would result in an
enforceable event of default under ALF's secured loan facility.

Chairman of Directors

Hi Balance.

Can you fill in a few details for me. I trade cattle mostly at Morrinsville saleyard. 1.5 years ago ALF was in the Sh-t for sure and i stopped trading through them and went to Wrightson. Remember if a firm goes bellyup just after you sold cattle throught them you may or may not get paid.Not an encouraging thing to do. About a year ago ALF spun off a firm called NZ Farmers Livestock of which they own about 70 to 80 % off if my memory serves me correctly.Naturally this firm NZFL wanted me back trading with them as they claimed they were seperate from the whoes of ALF. I did not think so and have stayed with Wrightson.
Now my question is what do you think happens with this holding ALF has in NZFL after they default next week??

[digger]

Hi Snapiti
My quess is a cheap takeup for RD1. If it comes up at a forced sale I can not see the agents having enought Knowledge or resources to pick it up. Maybe they will try to flog it off to the existing clients,
Watch this space is about all i can say to sum up.

[Balance]

Hi Snapiti
My quess is a cheap takeup for RD1. If it comes up at a forced sale I can not see the agents having enought Knowledge or resources to pick it up. Maybe they will try to flog it off to the existing clients,
Watch this space is about all i can say to sum up.

Irrespective of whether NZFL goes to RD1, PGW or goes down with ALF (if that happens), the prudent rule applies - which is not to deal with a credit risk as the extra 2% or so they may give is not worth the whole sum put at risk. The finance companies showed that glaringly - the extra 2% pa ended up costing the investors 60% to 100%.

[Vaygor1]

Irrespective of whether NZFL goes to RD1, PGW or goes down with ALF (if that happens), the prudent rule applies - which is not to deal with a credit risk as the extra 2% or so they may give is not worth the whole sum put at risk. The finance companies showed that glaringly - the extra 2% pa ended up costing the investors 60% to 100%.

Qualified auditors' report re going concern - ALF on its last legs?

Loan application turned down and now company trying to get a new one.

I do not think ALF will go broke.

Refer latest announcements just before Christmas 2012.
https://www.nzx.com/companies/ALF/announcements/231570 and
https://www.nzx.com/companies/ALF/announcements/231572

I firmly believe they should be back in the positive equity territory by now. ie Out of the red where they can focus on growth instead of survival.
With over 90 years of history in NZ there is still a great deal of rural allegiance there to continue supporting them in their now non-merchandise business (bought mostly by RD1).

The 2 risks shareholders faced prior to the above announcements were 1) Further write-down of assets and 2) Reliance on CAML accepting ALF's funding proposal.
Both of these risks are now gone by the looks.

I have bought a shed-load of these over the last while and held zero prior to the Hanover disaster, which should no longer have any major negative impact on their future business so long as they stick to their knitting.

Views and comments welcome.

Best regards,
Vaygor1.

[blobbles]

I read one sentence in their annual report which I felt was rather damning:

"The shareholder-approved Executive Share Option Scheme was introduced in 2007, allocating 1,300,000 Allied Farmers Limited share options to eligible senior executives. All share options had lapsed at balance date"

If senior management doesn't want to invest in their own company, why should I?

ALF unfortunately still has quite a few fleas and it will take some sorting out before I think of investing again. Essentially they are still in a state of selling off assets to pay their bills. Not something that makes me want to buy them!

[Vaygor1]

Thanks for the comment blobbles.
Apart from yours, the silence has been deafening.

Given ALF's complete and utter demise since 2006/2007 I for one am very pleased they have let the Executive Share Option expire.
With bonus issues, rights issues, executive management share issues, shares for bonds issues etc etc etc ALF have issued approximately 1,500,000,000,000,000,000,000,000 shares in the last few years... well, not quite that many but I wasn't involved back then and the number of zeros hurt my eyes when I read back. The quantities involved were almost of biblical proportions and almost an embarrassment to the NZX and NZ in general at the time.

Actually, over the last few days I have read every single post in this ALF thread, and nearly had an infarction laughing so hard at the wonderful comments posted here during all these share issues and the conjecture over how the formulas would work. I wish minimoke still contributed to this forum 'cause he/she was brilliant. (I looked up his/her profile and he/she hasn't logged in for quite a long time).

I am going to drip feed info to this ALF thread over the next while but 1st the obvious points which are:

ALF is no longer a finance company.
All the Hangover-Handover-Hanover assets are gone.
ALF appear to have a tidy arrangement now with CAML and I think there is much more to this arrangement than meets the eye.
Shoeshine man Rob Alloway and the other hopeless dreamers/idiots out there who were in charge have gone. NZX top 50...what a joke.
ALF are almost certainly back in +ve equity territory and if not, soon will be.
They have over a century of history in their traditional sector and that is an asset that takes 100 years to achieve and, unless you go completely broke, much more than 5 to destroy.
They have downsized tremendously and rationalised. In fact I am surprised they haven't de-listed as this would save a buck too.
Apart from merchandise (which they sold to survive) they are now focussed on their traditional sector(s) in my view.
They can focus on growing now instead of putting out fires.

God forbid if they ever decide to buy a sawmill again let alone a bloody finance company.... I mean buy a sawmill????... Good God, I mean if that was a 'natural next step' they may as well have got into making toasters, or become a nationwide distributor of door-knobs, or something else else even dumber like buying a finance company. To be honest, even the toasters bit wouldn't have surprised me... what a ginormous bloody disaster... and what a mess.

Anyway. It's over (maybe not over for Hotchin and Watson yet though). Now, I'm in. Not much to lose and loads to gain. I will happily eat my words if I have to. Time will tell (as it always does).

Watch this space.

Vaygor1.

[blobbles]

All well and good,what us investors are looking for though is that they can start making a profit or at least have a decent chance of doing so. But to me that point looks about 2-3 years off,maybe, if they don't do anything stupid and if they can keep getting loans to support them. While the people doing the stupid things may be gone, the onus of proof of running their business well is on them after the complete idiocy of the past 5 years. At the moment 1 of their business units is making a profit while the others are losing a lot of cash. Hence their lacklustre SP.

[Vaygor1]

Thanks again Blobbles... obviously ALF still way under the Radar in this forum. I will put some numbers down in the next week or so regarding my thoughts on Return on Investment into ALF.

In the meantime, take a look at this interview with Adam Feely on 4-Oct-2012, not long before he left his role as CEO of the Serious Fraud Office. Hanover is discussed.

http://tvnz.co.nz/breakfast-news/fin...-video-5114890

So on the assumption that Watson and Hotchin get their comeupance in the not-too-distant future, and assuming a fair amount of compensation is recovered from the (currently?) frozen assets, then who gets the money?

In my view, it's the debenture holders that lost out at the time... but what would the cut-off date be for determining who they are/were? And how would you allocate it out?

ALF inherited all the debentures with the debt-for-equity swap way back when.

Now CMAL is involved and when you read the press release about them buying the remainder of the Hanover assets from ALF https://www.nzx.com/companies/ALF/announcements/231570 ...then what's the deal now?

What intrigues me is the statement in the above press release:
"ALF will benefit from a new Funding Facility that CAML has agreed to provide contemporaneously with the purchase of the Transferred Assets, and CAML has signaled that it will consider further, more significant, funding support at the time other assets are sold."

If CAML have bought the Hanover assets, then I have trouble seeing what the connection is between the subsequent sale of those assets by CMAL and the impact that may have on CAML's future funding support for ALF.

All views welcome.

[Vaygor1]

Just reviewing my last post in this forum. Looking at the NZX announcement wording
"ALF will benefit from a new Funding Facility that CAML has agreed to provide contemporaneously with the purchase of the Transferred Assets, and CAML has signaled that it will consider further, more significant, funding support at the time other assets are sold."
By 'other assets', ALF is probably referring to their assets other than those acquired through Hanover.

But the question still begs on who gets Watson's and/or Hotchin's liquidated assets assuming they are seized.

That aside, what's ALF's position now? And how many assets are there left to sell?

Using the figures and other information in the Presentation to Shareholders
https://www.nzx.com/companies/ALF/announcements/230270
and (primarily) Section 5 of the nzx release detailing the CMAL transaction.
https://www.nzx.com/companies/ALF/announcements/231572
and ALF's latest audited financial report, I get the following position as at 22-Dec-2012:

Assets	($000,000)		Liabilities & Equity	($000,000)
Receivables	5.8		Property Loans	3.6
Merchandise	0		Allied Nationwide	5.6
Loans & Advances	4.9		Other Incl Creditors	6.5
Properties	0		Equity & Capital Notes	0
Other Assets	5
Total	15.7		Total	15.7

There is a bit of guesswork here as to the likely shift in equity since their last Annual Report. This shift would be due to their ongoing business-as-usual, realisation of the full value of their NZ Livestock subsidiary, and what increase (if any) there may have been in the value of their rural assets. None of these are reflected in the table above.

Also, I have had to take a stab at which accounting ledgers the CAML (and other) transactions apply to.

So in summary:

• Assuming my figures above are right (and I have been wrong before), then all properties have been sold.
• They have a NZ$5.6M hangover from the Hanover rigmarole, not a big deal in my view compared to the crap they were in before.
• Not sure they have to sell any more assets at all. Their assets appear to now consist of cash, cash equivalents, property [sales yards, offices?], plant and equipment.

ALF should be able to operate as it did in the past with 3 notable exceptions:
1) Their merchandising division is gone.
2) The $5.6M debt.
3) They need to get more of their loyal (and not so loyal) customers back.

As before comments & feedback welcome.

More to come soon...