Editorial: Save our SCF

OPINION: With less than 48 hours to go until the crucial deadline that will determine the future of South Canterbury Finance (SCF), its fate appears to be in the Government's hands.

The finance company, one of Timaru's biggest employers as well as a key influence in the wider South Island economy, has until August 31 to come up with fresh capital.

If it fails to do a deal the company, which has $1.9 billion in loans, may go into receivership.

SCF has had a torrid time in the last 14 months, and Allan Hubbard, its main backer, has had it worse. He is the subject of a Serious Fraud Office investigation and his two private investment vehicles, Aorangi Securities and Hubbard Management Funds, are in statutory management.

In the most serious development to date, the 82-year-old on Friday was accused by the statutory managers of overstating his finances, poor accounting practices and a multitude of financial mismanagement sins.

The complicated financial mess will take some time to sort out. Meanwhile the SFO is currently considering whether to pursue a criminal case against him. Investors in SCF's debentures are covered by the Government's retail deposits scheme but private

investors in Aorangi and Hubbard Management Funds – mostly retired South Island mum and dad investors – are not covered by any guarantee.

Since the early 1930s South Canterbury Finance has funded local businesses. The company's loans have helped generations of entrepreneurs get businesses off the ground.

It has helped thousands of farmers and small businesses buy the equipment they need to operate and expand.

SCF provided investors with an alternative to big banks, generating steady returns on their investments at competitive rates.

It is the Bank of Timaru, an incredibly important local institution providing jobs, investment and community sponsorship.

The financier came unstuck last year when a number of property loans went sour, and the news has been steadily bad since then.

The management was changed with turnaround specialist Sandy Maier brought in to restore its fortunes. Mr Hubbard stepped aside as chairman and he has tipped almost every asset he owns into the company to shore it up.

After months of talks the company is understood to be pursuing a deal that is dependent on the Government stepping in to take on its bad debts, leaving the healthy part of the business to recapitalise and rebuild.

For the Government it could be a case of pay now, or pay later. It can either choose a bailout deal to give the company a future, or take the hit that will inevitably come with receivership.

For the people of South Canterbury, the staff at the business, and its investors, it must be hoped that the Government can be persuaded to save SCF if it is given the option.

Naturally there would be fears that this will open the floodgates to other bailouts, but this is unlikely. SCF is a one-off, it is the largest surviving finance company and the only one in this position. In many ways it is too important to fail.

It is precisely at this point that the hard working staff at SCF and its investors would expect to have their equally hardworking local MPs lobbying on their behalf.

Rangitata MP Jo Goodhew and Waitaki MP Jacqui Dean both said yesterday they had not lobbied their Government colleagues about SCF.

Why they have not taken up the cudgels on SCF's behalf is not clear. Perhaps it is because they feel powerless to do anything or they are not confident enough to speak up.

Maybe they simply hold no sway or they fear the consequences of being seen to be bolshie about the issue in Wellington. It would hardly be inappropriate to speak up on such an important issue.

What is crystal clear is that SCF's position is precarious, and the consequences of its failure will be felt in this region for decades to come.

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