Allied Farmers has taken another substantial hit on the assets it acquired from the failed finance companies once controlled by Mark Hotchin and Eric Watson.
Allied managing director Rob Alloway said in a statement to the NZX that assessment work to date on the net assets acquired from both Hanover and United Finance - valued on March 1 at $175.5 million - required a further impairment provision of $51.5 million.
That resulted in a value of approximately $124 million for the assets.
When Allied shares came out of a trading halt on Friday, they immediately fell 6% in value to 6c. The shares closed at 5.9c.
Mr Alloway said the impairment provisions were subject to further adjustments arising from the completion of the work on the remaining $37.5 million balance on the acquired loan assets, and audit verification.
Craigs Investment Partners broker Chris Timms warned that the worst might not yet be over for Allied. The general meaning of impairment was anything overdue for more than than 30 days, or for which one or two repayments had been missed.
On May 7, Allied announced a net decrease of $17.9 million to $87.5 million in the value of its property assets acquired from Hanover and United.
The property assets included industrial development land around Queenstown and various lifestyle sections and properties around New Zealand.
Also on May 7, Allied indicated that the value of the loan assets acquired from Hanover and United was likely to be subject to an increase in impairment provisions.
The loans were typically secured over properties that were in various stages of development, ranging from bare land to completed and tenanted projects.
Mr Alloway said as part of the process of preparing the June 30 financial statements, Allied had completed assessment work on $69.1 million of the $106.6 million in loans. An increase in impairment provisioning of $33.6 million was required on the $69.1 million of loans assessed to date.
Loan asset impairment provisions and fallen value of property reflected the challenges in realising the assets from Hanover and United at the value in the companies' audited statements.
Several factors during this year had contributed to the impairment provision, he said.
They included:
• Lower valuations for commercial development land.
• Lower valuations of Auckland apartments.
• Bankruptcy or liquidation resulting in forced sales.
