Allied Farmers deal targets lender in strife

Rob Alloway: 'There's some pretty bad stuff on people's books. These companies are in moratoriums for a reason.'

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NZX-listed Allied Farmers has been working on an ambitious deal to buy loans from one of the country's larger failed finance companies.

The Sunday Star-Times understands that Allied Farmers Finance, wholly-owned by Allied Farmers, has been looking at a deal which could see debenture investors in a finance firm in moratorium offered the chance to swap their debentures for Allied Farmers shares.

There are several large finance companies operating under moratorium which might welcome the opportunity to sell some loans, particularly those in the property development sector.

Hanover Finance – due to make another capital repayment to investors by the end of the year – and Strategic Finance are seen as the most likely potential counterparties in the deal Allied Farmers is working on.

Allied Farmers, which has been in capital-raising mode this year, has been looking for ways of turning around recent poor performance.

A statement to the NZX on Thursday said Allied Farmers had been looking at opportunities and "over the past few months, the company has been in discussions with a number of entities in the rural and finance sectors with a view to achieving consolidation utilising Allied Farmers status as an NZX listed company".

Allied's managing director, Rob Alloway, a substantial shareholder in the company, would not confirm whether Allied Farmers was close to striking a deal but admitted the firm had been in discussions with firms in the sector. "I believe there are opportunities," he said, but added a word of caution.

"There is also a mixture of asset qualities out there. There's some pretty bad stuff on people's books. These companies are in moratoriums for a reason."

He admitted the firm had looked at debt for share swaps, but said such deals were not simple.

Alloway said his brief was to make things happen at Allied Farmers. "I bought into Allied Finance earlier in the year and joined the board in July. I wasn't particularly impressed with the annual result."

He said a firm the size of Allied Farmers should be looking at 10 to 20 deals a year, of which only some would proceed, and he added: "Allied Farmers will be making a number of announcements in the next four to six weeks around its current business and future opportunities."

It would not be the first time Allied Nationwide Finance had bought assets from a large finance company.

In 2007, it bought Hanover Group company Nationwide Finance. Last year it also bought the troubled Speirs Finance.

- © Fairfax NZ News