Hubbard targets $100m capital

Timaru businessman Allan Hubbard is dismissing talk of a merger with Pyne Gould Corporation and says the capital he will seek in the next few months is more than $100 million.

The multimillionaire has ruled out turning South Canterbury Finance into a bank, while he looks forward to the float of his wider companies under Southbury Group.

Mr Hubbard said yesterday he would not be seeking as much as PGC, which has just raised $267m through a rights issue and placement of shares.

He said he hoped to raise more than $100m when asked about an analyst's comments that SCF, its parent Southbury and group companies needed up to a $500m capital injection. "If someone gave us $500m, we would take it but we don't really need it."

Mr Hubbard, chairman of SCF, and controlling shareholder of Southbury, said SCF and Southbury would probably announce their big restructure and recapitalisation by the middle or end of November.

Southbury would probably float in February-March 2010. The float would involve the entities that made up Southbury, and possibly also two other companies.

Forsyth Barr was helping organise the float details, though how much had to be raised was yet to be decided.

"We are proposing a float next year with two other companies," Mr Hubbard said.

The Southbury Group components included Dairy Holdings and Helicopters NZ. The group also includes Scales Corp. Some, particularly the dairy, could be split out later and floated later in 2010, Mr Hubbard said. Alternatively the stake in Dairy Holdings could be sold.

Mr Hubbard had paid about $70m for the stake, and thought he could sell that same stake for at least $100m.

"We wouldn't sell our whole stake; we might sell half of it or something."

Mr Hubbard said people in his sphere in the South Island were keen to return to invest in South Canterbury Finance. He had been to two local meetings, including one in Ashburton on Thursday night, at which people had said they were confident in the future of SCF.

"[They're] very supportive of us ... We'll just go onwards and upwards," Mr Hubbard said.

The South Island's economy remained tied closely to farming, with the rural-based towns of Timaru and Ashburton well out of recession and little unemployment in those areas, Mr Hubbard said. He believed Fonterra would further increase its forecast payout.

Yesterday SCF appointed three new independent directors as part of its slow changing of the guard.

The new directors are experienced company directors: Bill Baylis (ex-chairman of PGG Wrightson), Stuart McLauchlan (a director of Scott Technology) and Denham Shale.

Mr Hubbard said Forsyth Barr was also helping with a plan for Southbury to raise between $40m and $75m of additional equity via a private placement.

New Zealand investors were being talked to regarding their potential input with the plan to be finalised in November, Hubbard said.

Asked if the newly named directors could be potential contributors to the group, Mr Hubbard replied: "They'll be directors of the float company."

The new money is essentially a strategy to resuscitate SCF from its exposure to troubled property loans. The property downturn had been "sudden", with transactions harder to make than in previous recessions, Mr Hubbard said.

Asked if it was a mistake that SCF had at one stage had nearly a quarter of its loans in property, he said: "You could say that. However, we're slowly extracting ourselves from it."

SCF's largest property loan of $44.9m is to a hotel business, and many of the loans are interest-only in terms of repayments.

Property loan impairments total $48.4m, or nearly 10 per cent of the portfolio, and 3 per cent of SCF's total net receivables.

Hire purchase financing would be a big part of SCF's new emphasis on loans, Mr Hubbard said.

He did not rule out returning to property though. "Anything that's profitable" would be considered down the line.

He reassured investors SCF was a good bet.

"We are going on as usual. It's a very good company. We had our second loss in 80 years and we are able to survive it. Their money [debenture holders and depositors] is guaranteed by the Government.

"We are making a few changes to make it more profitable and continuing on our merry way. So I would say stick with it."

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