Receivership is 'a disaster', supporters say

Former chief executive 'gutted'

South Canterbury Finance's receivership is sending shockwaves through the district and beyond.

This morning the company announced that it has been unable to complete a "recapitalisation and restructure".

As a result, the company would have been unable to certify to its trustees in accordance with the terms of its debenture trust deed.

Accordingly, South Canterbury Finance Limited has requested Trustees Executors to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so.

SCF was burning the midnight oil last night to thrash out a life-saving deal to avoid its collapse, but to no avail.

FORMER CHIEF EXECUTIVE 'GUTTED'

 

Former SCF chief executive Lachie McLeod said he was gutted by the demise of the finance company which has ''battled for the last two years'' with problem loans.

When asked about Allan Hubbard's role in the failure of the company, McLeod said he did not want to go into detail about the former chairman.

Asked about Hubbard's health and demands of having to be on regular kidney dialysis, McLeod said he did not want to comment.

"It's been bloody hard work for everybody and it's not time to comment on any of that really."

McLeod said he personally had worked as hard as anyone on SCF during the period he was with the company to ensure it was a going concern.

Asked about his performance as chief executive with SCF, McLeod said: "That's a hard question as well, but I guess no-one bloody worked harder in the company than myself.

"That's certainly what did happen but we'll have to reflect on that as time goes on."

McLeod left SCF about 10 months ago and reportedly since settled a $15 million loan from the company.

According to the Companies Office, McLeod still owns a stake in SCF. He owns about 10 per cent of Southbury Group, the company that owns nearly 80 per cent of SCF.

McLeod described the impact on staff and investors and wider community surrounding SCF as "bloody awful".

'BIGGEST ISSUE TO DISTRICT'

The long term risk to South Canterbury is the biggest issue the district faces in wake of the news of South Canterbury Finance's receivership, according to Aoraki Development Trust general manager Wendy Smith.

''It's the loss of that type of (financial) service that has been outstanding for so many years,'' Mrs Smith said, minutes after learning SCF was in receivership.

''It is a major shock to the district.''

She said what was important now, was what the level of government intervention would be.

''A level of government intervention is highly desirable.

''It is not about panicking. We just have to see how it rolls out.''

As the stock exchange learnt of the receivership at 9.30am, staff in SCF's Timaru office were still behind their desks. From the public area, one staff member could be heard answering questions from a caller as to the balance in their investments with the company.

SCF business manager Nigel Davenport said staff would take part in a conference call with chief executive Sandy Maier at 10.30am.

Albert Makary, a long-time supporter of SCF president for life Allan Hubbard said the receivership was a disaster.

"There's been a character assassination of Allan Hubbard."

Mr Makary said he was looking forward to learning what the Government would announce this afternoon.

NERVOUS TIME

Timaru Mayor Janie Annear told Radio New Zealand this morning the town had "emotional connection" with the Hubbards because of the family's huge generosity and support for emerging businesses since the 1930s. "But we are also intricately linked with them on all sorts of business fronts as well."

"Our community is very nervous about this situation."

Ms Annear said it was impacting not only on the Timaru community, but the South Island and New Zealand as well.

She said the question that needed to be asked was whether New Zealand's fragile economic recovery was going to be affected by the collapse of one of the country's largest corporates.

"Let's hope that in fact is not going to be the case this morning."

Meanwhile Timaru Retail Association chairman Tim Small said the problem was that some of the banks had been "a little less than forthcoming" recently with finance for businesses.

South Canterbury Finance had made a big difference to many of the businesses in the region, he said.

"Plus some of the interest rates were very attractive," Mr Small said.

He denied that the problems had occurred because businesses were getting cheap money and SCF were paying more than they should have been.

Mr Small said more than 50 per cent of the retail association's members either owed money or were owed money by SCF.

'TIME FOR PATIENCE'

National MP Jo Goodhew, whose Rangitata electorate covers Timaru, said the failure of SCF would be felt across the region.

"It remains an anxious time for the people in my community. I think that many will take heart knowing that they've been reassured about the government guarantee, and that will certainly assist a large number of people.

"I think now's a time for patience, just to see how the details of what will happen take shape, though it's hard to be patient when you're anxious.''

"It would be fair to say that it doesn't matter where I go in my community, everyone is talking about, and is concerned about, the situation.''

She would not comment on what action she thought the Government should take, saying that was a matter for Mr English.

'SURPRISES'

Late yesterday afternoon SCF chief executive Sandy Maier said "there are three parties that consider themselves in the race" to inject cash and save the company.

Mr Maier told Radio New Zealand this morning the NZX announcement "will contain some surprises."

Speaking to Morning Report, he said it should be seen as a progress report, not as the end of the process.

Mr Maier said the solution will have "both winners and losers" and he expected "some angst" in the response to the announcement.

"There has a wide range of problems that we've been putting right," Mr Maier told the programme.

He said there was "a toxic section to South Canterbury". "We have had our arms round the problems now for quite some time."

The Government has also been standing by to strike a deal should the company fail to find its own saviour.

Prime Minister John Key confirmed the cost to the taxpayer could be as much as $700 million under the Government's deposit guarantee scheme if SCF falls over.

Finance Minister Bill English has cancelled a trip to Hong Kong and Singapore to deal with any fallout.

The finance company owes more than 35,000 depositors and debenture holders about $1.7 billion, with $1.5b of that covered by the Government's guarantee.

However, the latest assessment is that its bad loans would leave a shortfall of about $700m owed to depositors and investors - a cost that would have to be picked up by taxpayers.

Key confirmed yesterday that taxpayers were also liable for interest on deposits guaranteed under the scheme, which in SCF's case is as high as 8.5 per cent.

He also confirmed statutory management of SCF may be an option.

However, he also said: "It's important to note SCF is still operating and we don't want to prejudice any commercial discussions that may be taking place with private parties."

South Island millionaire Allan Hubbard is the major shareholder in SCF. He is under investigation by the Serious Fraud Office over other business interests, which are already under statutory management.

A group of about 20 people gathered outside the SCF building on Sophia St in Timaru last night to show their support for the finance company and Mr Hubbard.

Key confirmed South Canterbury's books were in a similar state to those of Hubbard's other interests, with poor back-office systems and incomplete records.

The Government has refused to step in to save other failing finance companies but the prospect of the South Island giant failing is causing jitters over the impact on the wider economy.

One option may be for the Government to separate out the bad loans and accept its liability to depositors up front, rather than wait for the company to fail before it triggers the guarantee as a backstop.

That could lessen the risk of a forced sale of assets - including South Island businesses, farms and other property holdings - and the potential knock-on effect.

- with Fairfax and Stuff

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