SCF warned over $150m credit claim

EMMA BAILEY
Last updated 11:30 26/06/2014

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South Canterbury Finance had been warned by banks to stop saying it had access to $150 million credit, when it did not.

Former SCF chief financial officer Graeme Brown continues to give evidence today as part of the defence of former SCF directors Ed Sullivan and Robert White, and former chief executive Lachie McLeod.  

The trial is being heard by Justice Paul Heath in the High Court at Timaru.

Two credit lines were mentioned in SCF prospectus 59, from October 24, 2008 to September 21, 2009, one for $100m for three years and another for $50m for a year, from BNZ and Commonwealth Bank.

The Crown argues the credit lines had expired and as a result White and Sullivan each faced a charge of a false statement by a promoter.  

The prospectus was also used to gain access to the Crown Guarantee Scheme, which is the key charge in the case as $1.58 billion was paid out in 2010 when SCF failed.

On April 24, 2009 a letter was sent from BNZ to Brown urging SCF to stop making public statement about the credit lines.

"The banks have not formally approved extensions of either facility. It will not be prepared to fund a drawing request if one is received under the three year facility (having already expired). It wishes for the agent on behalf of the banks to cancel the three year arrangement.

"The borrower continues to state publicly that it has $150m facilities available from two banks ... such a statement is not correct."

Brown said he told the Reserve Bank who then sought a meeting with Commonwealth and BNZ about the facility which was "highly unusual", Brown said.

Brown was employed from 2006 until January 2010.

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