Allied Farmers, the parent of Allied Nationwide Finance, will seek to raise NZ$19.3 million via a rights issue. The company needs a higher level of equity to meet a new equity covenant applicable on September 30.Allied Farmers has a NZ$19.5 million borrowing from Westpac and another unit, Allied Farmers Rural, has an overdraft facility of NZ$2.5 million with the same bank.The banking facilities are secured by way of a floating charge over all assets and undertakings of the Allied Farmers Charging Group and include financial covenants on minimum equity, minimum bank funding cost cover, minimum total leverage ratio and minimum earnings.According to the covenant, Allied Farmers Charging Group's minimum equity required increases to NZ$20 million on September 30 from NZ$10 million. Allied has already managed to get an extension on its banking arrangements with Westpac to March 31, 2011 but must meet restructuring and capital raising milestones. Allied says the cash injection will help to reduce debt and achieve longer term business plans.Allied Farmers is the parent of finance company Allied Nationwide Finance which has a guarantee under the government's retail deposit guarantee scheme. The company, however, does not qualify for a guarantee extension currently because it has a rating of B with creditwatch negative, and is thus below the minimum threshold of a BB rating.Allied's rights issue offers shareholders one new share at 2.5 NZ cents for every three shares held, and is at a steep discount to the traded price of the share at around 5.5 NZ cents when the issue was announced. The capital raising has been partly underwritten for NZ$9 million.