Allied Farmers looking to raise $7.5m

Listed rural services and finance group Allied Farmers is the latest in a growing list of companies raising equity to buttress their balance sheets against uncertain times.

The company said yesterday it would seek to raise $7.5 million in a renounceable rights issue opening next week.

The money raised would be used to re-finance its arrangements relating to the acquisition of Speirs Finance last year, to reduce core debt and to provide extra working capital for the company's rural business divisions.

"We are now seeking additional capital to underwrite the company's growth and development, and to provide a further opportunity to our shareholders to invest in the future of Allied Farmers," chairman John Loughlin said.

Shareholders will be offered six new shares for every seven they hold on April 22, with each new share having a stapled option to buy a further new share before May next year.

The new shares are offered at 40c each and the exercise price for the options is 60c. Shares last traded at 65c.

Allied Farmers has applied for the rights to be listed on the NZX.

The offer will be underwritten up to $6 million by Wellington investment banking firm McDouall Stuart, whose principal Andrew McDouall sits on Allied's board. If fully subscribed, the number of Allied Farmers shares on issue will rise from 21.9 million to 40.66 million, not including any options exercised.

Allied acquired Speirs Finance, which had a significant securitisation programme, in September for $5.6 million, including $3.1 million cash and $2.5 million in new shares, creating a combined entity with a loan book of about $400 million.

But in February Allied reported a $3.91 million December half loss against a $1.54 million net profit a year earlier, with $1.63 million after-tax loss from Allied Finance and corporate costs weighing on the result. It decided against paying an interim dividend.