Sth Canterbury Finance looks likely to pay back US private investors

South Canterbury Finance is likely to be looking at paying back US$100 million (NZ$137m) to United States investors in the finance company, an industry commentator says.

Kapiti Coast finance commentator and SCF investor Chris Lee said he expected a new debenture prospectus planned by SCF would emerge soon.

But he said the finance company would first probably be taking a look at the US$100m private placement, and whether it could extricate itself from the facility it is using as capital backing.

"[The prospectus] is all ticked off. As I understand it, the only thing left to be done now is to declare the outcome of the repayment to the Americans."

Lee said as SCF had seen its rating downgraded by Standard and Poors, it would face higher costs to keep the US$100m private placement by US-based investors.

"I'm very sure their focus will be on settling that deal which enables them to repay the Americans and get out of that facility . . . I would think that given that their credit rating's fallen, the cost of money would be too expensive." There would probably be a break fee being negotiated, Lee added.

S&P has downgraded SCF's credit rating to BB+ and placed it on creditwatch negative, signalling a 50 per cent chance of a further rating drop within three months.

Earlier this year SCF announced it and its backer Allan Hubbard were looking for a capital restructure and succession plan. In August, it was announced SCF's owner, the Southbury Group, had appointed Forsyth Barr and Harmos Horton Lusk as advisers to assist in the capital restructuring of the group.

A further announcement would be made in the next three weeks, the August 28 statement said.

That forecast date has well and truly gone, hampered by SCF's need to focus on the registration of a new debenture prospectus.

The company withdrew the existing prospectus on August 21, due to a delay in auditing its June 2009 accounts, meaning it has had to hold fresh subscriptions in a trust.

Lee said he thought details of the recapitalisation were still some time away, perhaps weeks.

"Everybody's impatient but one imagines by Christmas that [SCF's] business will be back to normal, that the company will be recapitalised, and hopefully its credit rating will have been stabilised."

The capital raising - for between $150-$200m - would probably be through the float of part of the Southbury Group, and the introduction of new cornerstone investors to SCF, he said.

Lee said he also imagined SCF would extend its coverage under the Government's deposit guarantee scheme, from October 2010 to December 2011.

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