nz arm of allco sold

THE saga over the sale of investment firm Allco HIT's New Zealand finance arm could be settled by the end of next month.

After nearly two months of tortuous negotiations over the future of Stategic Finance, which has been badly affected by the deterioration in the local finance market, a consortium of investors are close to taking over the business.

Allco HIT, whose various investment operations have racked up huge losses as a consequence of the credit crisis and the problems suffered by its manager, Allco Finance Group, has agreed to sell its troubled NZ subsidiary in a cash and shares deal.

The consortium - made up of Strategic's former owners, its current management team, and the Australian arm of the Bank of Scotland - has agreed to pay $NZ25 million ($20.4 million) plus 8 million Allco HIT shares owned by some of its members.

The terms also include the payment of $50 million for the investment portfolio jointly held with Allco HIT, of which $NZ10 million will be held back for two years.

The portfolio is now valued at $NZ67.3 million.

Details of the deal, which were outlined to investors in New Zealand yesterday, will be put to Allco HIT's shareholders in coming weeks.

If approved, the transaction should be completed by late next month. That will then result in the cancellation of the Allco HIT shares that are handed over as part of the deal.

The announcement comes after Allco HIT disclosed in its annual results on Friday that it had taken a $223.3 million write-down over the value of Strategic Finance.

That action was prompted by the draining away of investor confidence in the NZ finance sector following the collapse of several similar operators.

The NZ market has been affected by low re-investment rates and a huge escalation in bad debts as that nation's economy has fallen on bad times.

Last month Strategic suspended redemption payments, affecting 15,000 investors with $NZ325 million ($265 million) of invested funds.

Strategic Finance's difficulties resulted in Allco HIT suffering a net loss of $322 million to the year ended June 30.

Allco HIT's shares were unchanged at 10c yesterday.