Allied Farmers faces writedown on NZ$23m Hanover loan; Wants to bankrupt Nigel McKenna over NZ$110m Kawerau Falls guarantee

Read Allied Farmers statement below:

Appointment of General Manager – Merchandising Allied Farmers has announced the appointment of Dr Chris Beh to the role of General Manager – Merchandising to its rural subsidiary, Allied Farmers Rural, filling a key vacancy in its executive team. Dr Beh comes to Allied Farmers from dairy giant Fonterra, where he has held various engineering and management roles both in New Zealand and offshore over the past seven years.

Most recently he has worked in strategy, mergers and acquisitions, and has been involved in various projects associated with the rural supply chain, merchandising, and manufacturing, including an extended term at a subsidiary in South America. Dr Beh holds a Bachelors Degree in Engineering from Auckland University and a PhD in Chemical Engineering from Monash University in Australia, and is currently studying for his MBA.

Allied Farmers Managing Director, Mr Rob Alloway, said “We are delighted to have Chris join us to lead our rural merchandising division. I know he will be a huge asset to Allied Farmers and are confident he will bring a number of new and innovative ideas to our wider business.”

Honk 2

Allied Farmers Investments Limited (AFIL) has been informed by lawyers for Hong Kong based lender Asian Syndicate Finance that borrower Honk 2 Limited will default on a secured loan relating to a tract of un- zoned development land totaling 59ha at Silverdale in the Rodney District just north of Auckland.

Honk 2 Limited is an investment vehicle of Mr Andrew Tauber and Mr Paul Webb. AFIL holds a second mortgage over the property, relating to a NZD23 million loan made to Honk 2 Limited by Hanover Finance in March 2009. AFIL has today received a preliminary updated valuation of the Silverdale property, which indicates that Allied may need to write down the book value of the loan.

Mr Alloway said “it is not possible for us to fully understand the final impact on the carrying value of the loan until the completion of both the new valuation, and /or the sales process is completed”.

Peninsula Road

Allied Farmers Investments Limited (AFIL) has been supporting Fletcher Construction in its bankruptcy action against property developer Mr Nigel McKenna. From April 2005, Hanover Finance and United Finance provided funding for the staged development at Kawarau Falls Station in Queenstown, which is guaranteed by, Mr McKenna.

The amount guaranteed under the loan agreements, which are in default, is at least NZD 110 million.

Mr McKenna surprisingly however omitted to include these significant AFIL debts in a creditors’ proposal put to the Court at the last minute on 21 March 2011, offering just one cent in the dollar to creditors. The bankruptcy hearing has now been adjourned until 18 April 2011, to allow time for a creditors’ meeting to be held to vote on the creditors’ proposal. Whilst AFIL has now been included in the proposal, as indicated to the Court, AFIL is unwilling to support the creditors’ proposal put forward by Mr McKenna, which should result in bankruptcy being declared at the hearing on 19 April 2011.

Mr Alloway said “We will not allow borrowers to avoid bankruptcy on the basis that over a long period of time we will receive a tiny proportion of what is owed from future earnings and unknown income sources. We believe the prudent course of action is to follow a bankruptcy process, thus ensuring that the Official Assignee is able to exercise its powers, unwinding preferential transactions, and managing the bankrupt’s assets for the benefit of all creditors, including ourselves.”

The bankruptcy of Mr McKenna would have no impact on AFIL’s carrying value of the loan, as it has being previously written down to zero.