Allied Farmers proposal tops Hanover receivership

Allied Farmers proposal trumps receivership for Hanover, directors say

Nov. 30 (BusinessWire) – Hanover Finance’s independent directors have concluded that the $400 million all-stock takeover offer from Allied Farmers is the best option for its investors, who may otherwise have to take their chances with a receivership.

Hanover directors David Henry, chairman, and Des Hammond made their announcement after receiving a report from Grant Samuel which said Allied Farmers’ proposal was “superior” to the status quo of a debt restructure and possible receivership, with a better alternative offer unlikely to emerge.

“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 Restructure Plan (DRP) currently in place,” Henry said. “The proposal means Allied Farmers can take a longer term view in managing the assets and has a broader range of options to improve asset values.”

Hanover this month posted a $102 million annual loss and confirmed investors would get 70 cents in the dollar at best, a blow to holders of its debentures and notes who last year approved a moratorium on payments in the hope of getting all their money back. Hanover and United has $296.8 million of debentures and term deposits and total securities of $317 million. A year ago, the same assets were valued at $516.6 million.

Under the Allied proposal, the Hanover investors will end up owning more than 90% of the enlarged company, which will have low enough gearing to be able to pursue other growth opportunities, Allied chairman John Loughlin said this month.

Today, Hanover’s Henry said Allied “will be able to arrange new funding and use the proceeds from asset realisations to support the business, instead of using such proceeds to meet the short term repayments required under the DRP.”

At the time the DRP was entered into, Hanover’s managers and directors had expected that the property market would “stabilise and potentially show signs of recovery in late 2009 or early 2010.”

Instead, “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,” Henry said.

Under the Allied proposal, Hanover secured depositors would receive a total 78 cents in the dollar and United secured stockholders would get 90 cents.

Subordinated noteholders and capital bondholders – who were to receive nothing under the DRP - would get 30 cents in the dollar.

Hanover’s high-profile owners, Mark Hotchin and Eric Watson would exit under the deal with Allied, which would leave some $10 million in their company for mop up and closure costs. All other assets transfer across.

Shares of Allied fell 3.7% to 26 cents today and have shed 64% in the past 12 months.

(BusinessWire)