• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
 
4 December 2009Dear Investor
ALLIED FARMERS PROPOSAL
 We are the trustee for the secured debenture stockholders in United Finance, thesubordinated unsecured noteholders in Hanover Finance, and the secured bond holders inHanover Capital. You have an investment in one or more of these companies.We are writing to provide you with important information on the proposed transactionbetween Allied Farmers, Hanover Finance, United Finance and Hanover Capital. Youshould have already received a notice of meeting in relation to this transaction, together withan Explanatory Memorandum, Grant Samuel independent report and Allied Farmersprospectus.This proposed transaction is a significant departure from what you initially put your moneyinto and a shift away from the debt restructuring plan investors voted in favour of inDecember last year. We have not had any involvement in developing the proposedtransaction; however one of our roles is to seek to ensure that you have sufficientinformation to make a fully informed decision in respect of the transaction. It is not our roleto recommend to you what decision you should make. That is a question for you based onyour individual circumstances.This is a complex decision. There is no easy answer as to which way you should vote.Because of this, you should:
•
take the time to read all of the information that has been provided;
•
seek advice from a financial adviser or other suitable professional whom you trust;and
•
whether you are in favour of, or against the transaction, make sure you vote
either
atthe meeting at the Ellerslie Event Centre in Auckland at 10.30am on Wednesday 16December 2009
or
by sending your proxy vote so that it is received by 10.30am onTuesday 15 December 2009. Delivery details for proxy votes are set out at the endof the notices of meeting.Attached to this letter is some additional information to help you understand the implicationsof the proposed Allied Farmers’ transaction:
•
Appendix A – Background and summary of the proposed transaction
•
Appendix B – Overview of the Grant Samuel Report
•
Appendix C – What are the Trustee’s areas of concern?
•
Appendix D – What should I take into account when making my decision?If you have any questions of Perpetual Trust as trustee, we welcome those questions. Tospeak to us please call 0800 737 738.Yours sincerelyLouise EdwardsChief Executive
 
 
2
APPENDIX ABackground and summary of the proposed transaction
1.
We have endeavoured to set out below a simple summary of the transaction.
2.
If the transaction proceeds, all investors will become shareholders of Allied Farmers(whether or not they vote in favour of the transaction) and will cease to have anyclaim on Hanover Finance, United Finance or Hanover Capital. There are a numberof important differences between holding shares and holding a debt claim. Theseare discussed in more detail in "Appendix C -
What are the Trustee's areas of concern? 
"
Background 
3.
Currently the Hanover group of companies have issued the following four types ofsecurities. You will hold one or more of these securities.
•
Hanover Secured Deposits;
•
United Secured Stock;
•
Hanover Finance Subordinated Notes; and
•
Hanover Capital Bonds,(together the "
Hanover Group Securities
").
4.
Investors agreed in December 2008 that no interest will be payable on the HanoverGroup Securities and that repayment was to occur over a period of time until 31December 2013. In addition the holders of the Hanover Finance SubordinatedNotes and the holders of the Hanover Capital Bonds agreed that half of theirinvestments would not be repaid to them. Recently Hanover Finance and UnitedFinance have announced that it is unlikely that the Hanover Group Securities will beable to be repaid in full. The revised forecasted repayments are as follows:
•
In respect of each $1 of Hanover Secured Deposits:
70 cents
(inclusive of the 6cents per $1.00 paid to 30 September 2009).
•
In respect of each $1 of United Secured Stock:
90 cents
(inclusive of the 6cents per $1.00 paid to 30 September 2009).
•
In respect of each $1 of Hanover Finance Subordinated Notes:
Nil
.
•
In respect of each $1 of Hanover Capital Bonds:
Nil
.There has been no independent verification of these forecasts. No assurances aregiven that the forecast numbers are achievable.
Proposed Transaction 
5.
The proposed transaction comprises, in essence, the following steps:
 
 
3
(a)
Step 1: Allied Farmers issues ordinary shares in Allied Farmers to eachinvestor. In exchange, each investor transfers all the Hanover GroupSecurities they hold to Allied Farmers. Investors do not receive any cashpayment from Allied Farmers (or from any of the Hanover group entities).Allied Farmers has agreed to issue shares with an issue price equal to$396.177 million, which is the assessed value of the loan assets AlliedFarmers is to acquire from Hanover Finance and United Finance at Step 2(see (b) below). The "issue price" of the Allied Farmers’ shares will bedetermined by reference to the prevailing trading price of Allied Farmersshares on the stock exchange in the period immediately prior to theinvestor meeting on 16 December 2009. The "value" of the shares to bereceived by each investor is (subject to rounding) as follows:
(i)
United Secured Stock: In respect of each $1.00 originallyinvested, 84 cents (investors have already received payments of 6cents from United Finance).
(ii) Hanover Subordinated Notes: In respect of each $1.00 originallyinvested, 30 cents.(iii) Hanover Capital Bonds: In respect of each $1.00 originally invested,30 cents.
Please note that you will not receive these amounts as a cash payment.Instead you will receive Allied Farmers ordinary shares.
For example ifyou had invested $10,000 in say United Secured Stock, you are to receive$8,400 in value from Allied Farmers. If the assessed issue price of an AlliedFarmers share is $0.25
1
, you would receive 8,400 ÷ 0.25 = 33,600 shares inAllied Farmers.
Grant Samuel state in their report at page 35 that "
there is no certainty regarding the price at which Allied Farmers shares will trade and it is possible that investors may experience a significant decline in the value of their Allied Farmers shares, at least initially, as large volumes of shares are placed on the market by investors wishing to liquidate their investment and realise cash albeit at a discount.
"
The transaction gives rise to different considerations for different investors:
United Secured Stock 
•
United investors are asked to give up some value which they have(approximately 1.5 cents/$1.00), which is in effect being given to holders ofthe Hanover Subordinated Notes and Hanover Capital Bonds.
•
The
 
realisable "value" of the Allied Farmers shares (see the discussion inparagraph 6.4 on page 34 of the Grant Samuel report) to be received (andthe potential risks and rewards associated with holding shares) should becompared to the possible returns if the debt restructuring continues or if areceiver is appointed in the future (see pages 36 and 37 of the GrantSamuel report). Copies of the audited financial statements of UnitedFinance for the year ended 30 June 2009 are available atwww.hanoverfinance.co.nz(Financial Statements).
1
Allied Farmers ordinary shares were quoted on the NZSX at 25 cents on 1 December 2009.
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...