New investor still possible, Maier insists

Cash-strapped South Canterbury Finance is hopeful of finding a buyer for the business by an August 31 deadline after a call for it to be placed in statutory management.

SCF is not in statutory management, though all the business affairs of its majority owners Allan and Margaret Hubbard are in statutory management after a government decision on June 21.

"We are nowhere close to saying 'well we won't be able to get a major investor in'," SCF chief executive Sandy Maier said yesterday.

A column published in Businessday has said SCF should be placed in statutory management and raised questions about how much equity was left in SCF. It postulated that Southbury, majority owned by Hubbard, could be worthless.

It said that SCF's 8 per cent government-guaranteed debentures were distorting the depositor market and the Government had access to cheaper funding if it ran SCF under statutory management.

Maier said the columnist gave a proviso that presuming Hubbard failed to find a buyer to bring in capital, then SCF should be placed in statutory management.

Maier said the plan all along had been to bring in new capital and the company was still working hard on that.

The primary driver was to sell the company as a whole to preserve the SCF institution and brand, "rightly or wrongly".

There were tax continuity reasons for that as well. "Now we may not achieve that."

He had also said he imagined that an investor might split it into three parts: a good loan company, bad loan company and a unit with SCF's investments.

The trustee has granted SCF a waiver to provisions in its trust deed until August 31. It has a month to bring in new capital to remedy breaches to its trust deed.

"We are still on track, chugging away, working through with investors, plural, to see if we can get the right kind of offer ... " Maier said.

The capital could come in a number of ways, through a sale of Southbury or part of Southbury or a sale of SCF or part of it.

He assumed the statutory manager, Grant Thornton, would make the ultimate decision on accepting an investor's offer for SCF but Maier said he expected Hubbard would be consulted.

Treasury, which has granted a government guarantee for the debentures and bonds of SCF, would have to give its approval also, as would the trustee for debenture holders.

If there were losses for the year to June 30 2010, the new investor was needed to rebuild equity. The results for the period are not out yet.

Statutory management of the Hubbards' business affairs had not been good for SCF and had muddied issues for investors, he said. It had certainly caused the flow of new debentures to slow.

Maier said he had not checked but expected SCF's cash position was worse than before the statutory management though he would not reveal how much cash the company had on hand. Money was coming in from loan recoveries and new debentures and going out to repay maturing debentures.

Inflows of debentures were up and down and yesterday had been "phenomenal" - at traditional levels before the statutory management, Maier said.

If SCF failed the Government would have to write a cheque for nearly 1 per cent of gdp and repay more than 30,000 investors.

"It's not a trivial amount." SCF was much bigger than most other finance companies. It was about three times the size of Bridgecorp.

- © Fairfax NZ News