Allied Farmers relationship with Hanover Finance has collapsed and legal action will shortly begin.

Allied acquired the beleaguered finance company’s loanbook in a debt for equity deal in December last year.

Managing director Rob Alloway told Country 99 TV that the farm supplies company wouldn’t be paying the final $5 million installment it owed Hanover due to what it says are serious breaches of contract.

But business commentator Bernard Hickey says Hanover’s dealbreaker could be a timely intervention for cash-strapped Allied Farmers.

Allied says it will be taking legal action against former directors Mark Hotchin and Eric Watson and other key players in the failed finance company.