In a letter to investors, Perpetual chief executive Louse Edwards said the offer of shares as opposed to cash could be a concern for investors, as there is "no certainty as to what price the Allied Farmers' share will trade." The letter mapped out the options for investors, saying the three options under consideration are that the proposal is accepted by investors, that the offer is turned down and the current debt restructuring continues, and that the offer is voted against and Hanover and its subsidiaries go into receivership.

"This proposed transaction is a significant departure from what you initially put your money into and a shift away from the debt restructuring plan investors voted in favour of in December last year," Edwards said in her letter to investors. "If investors seek to sell Allied Farmers' shares in the short term they will very likely receive a materially lower sum - and from which sum they will be required to pay the costs of that sale such as brokerage - primarily because there are likely to be more sellers of the shares than buyers."

Hanover Finance's independent directors are recommending investors accept the $400 million all-stock takeover which would see debenture and note holders control more than 90% of the new-look Allied Farmers. Allied's chief executive John Loughlin told sharebrokers he is confident his company can realise more value from the Hanover loan book than the failed finance company can under its moratorium obligation, as it can take a longer-term view in squeezing the cash out of Hanover's debtors.

Perpetual also earmarked the financial position of Allied Farmers as an area of concern, saying the prospectus did not take into account the company's trading results since June 30, and that the asset valuation had not been independently scrutinised. The letter also said no adjustments had been made for the fair value of assets, nor any for goodwill which may be written down at some stage in the future.

Edwards said in a statement that Hanover's directors doubted the company would be able to meet the full repayment investors agreed to under its debt repayment plan last year after a significant write down in asset values, and that the timing of any recovery was also uncertain.

Last month, Hanover posted a $102 million loss and confirmed its best-case scenario would see investors receive about 70 cents in the dollar.