Hanover directors back Allied deal

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Hanover Finance chairman David Henry says Allied Farmers' audacious $400 million bid for the troubled lender's loan book is in the best interests of all classes of investors.

Despite intense speculation last week, Mr Henry said there had been no rival or counter offer to that made by the NZX-listed finance and rural services company.

Hanover's independent directors have unanimously recommended that secured and unsecured investors back the deal when asked to vote on the matter at a special meeting in Auckland on December 16.

"We are of the view that Allied Farmers has the potential to add real value enhancement to the Hanover and United loan and property assets that is not possible under the debt repayment plan currently in place," said Mr Henry.

When the repayment plan was entered into, it was anticipated at that time by management and directors that the property market would stabilise and potentially show signs of recovery in late 2009 or early 2010.

"However, as the current directors indicated in a letter to investors in November 2009, market indicators have continued to move in a more negative direction and trading conditions in general, and the property market in particular, continues to be challenging," said Mr Henry.

"This significant deterioration has meant Hanover's current estimates indicate we are no longer likely to achieve full repayment to investors under the repayment plan."

Mr Henry said directors believed the proposal is likely to be in the best interests of all classes of investors. He noted the Grant Samuel report commented that an alternative superior offer is unlikely and that the consideration being offered by Allied Farmers was fair.

Under the Allied proposal, Hanover secured depositors will receive a total 78 cents of value, an improvement on the current estimate of 70c under the repayment plan, and United secured stockholders are as they were before with an estimated return of 90c.

This includes 6c already paid up to September 2009 under the repayment plan.

Subordinated noteholders and capital bondholders are expected to receive 30c of value versus no forecast under the original repayment plan.

Mr Henry said the proposal meant Allied Farmers could take a longer term view in managing Hanover's assets.

Options to improve asset values included an ability to provide ongoing funding support to complete property developments and an ability to negotiate with prior ranked lenders over borrower's assets in order to ensure an orderly realisation over time.

"We also believe Allied Farmers will be able to arrange new funding and use the proceeds from asset realisations," he said.

All classes of investors have been mailed an Explanatory Memorandum booklet with full details of the offer including a copy of the Grant Samuel's independent appraisal of the offer.

Mr Henry, fellow independent directors and shareholder Mark Hotchin are expected to front up to investors at a series of briefings across the country in the week before the vote.

- © Fairfax NZ News