Who will replace Hubbard ?

South Canterbury Finance board's work on a succession plan for Rich List standout Allan Hubbard should find shape before Christmas, chief executive Lachie McLeod says.

SCF is backed by Timaru millionaire Allan Hubbard, aged about 82 and listed in the National Business Review Rich List 2009 as worth $550 million.

Hubbard owns the majority of Southbury Group, which holds all the ordinary shares in South Canterbury.

"That [succession plan] is something we're working on and keeping Standard and Poor's on the go on that. That's ongoing, and we've said we'll have a game plan on that before Christmas," McLeod said.

Business advisers were not involved at this stage. "We're just working with the board and looking at the options that are available for us," he said.

Standard & Poor's said it was placing the company's BBB-/A-3 rating on negative watch. The agency has warned SCF it has three months to cut or eliminate related party dealings and to shore up its balance sheet or face a credit ratings downgrade.

The related party dealings have been put at around 20 per cent of the finance company's $1.6 billion loan book.

McLeod said the international credit ratings agency was also keeping an eye on property loans held by SCF. The finance company this month announced a $58m writedown on property investments.

"We're still keeping in contact with them every two to three weeks, and are keeping up to date to where it is . . . we talked to them last week, just gave them an update and we'll do so every 10 days as we go through the 90 day [Standard and Poor's review] period."

Other things such as the New Zealand "flat" economy and developments in the finance company sector also came into play, he added.

McLeod said any downgrade would not necessarily see SCF having to pay back a private placement by United States investors into SCF worth about US$100m (NZ$150m). "It's only a trigger point. It basically means we have to renegotiate it, we don't have to pay it back at all straight away."

SCF's option to convert a $25m loan to rural services provider PGG Wrightson ran out about a week ago, but the loan remains in place for about a year to 18 months, McLeod said.

SCF made the loan in April with the finance company having the right to to convert the subordinated loan to shares at $1.50 a share. That option has now lapsed. "It was actually always a loan, and it was at the 12th hour that the option was put in place, so there's no change to that," McLeod said.

Yesterday PGGW shares closed 3 cents lower at 92c.

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