South Canterbury Finance Limited

[Snoopy]

SCF probably aren't doing it coz they have solvency/liquidity issues more pressing, but if and when they sort that out, apart from the market rerating these back to 50 plus, if I was a director, I'd be recommending buying the snot out of them

Reason why they would not be doing it already is that SCFHA's are considered as capital....

re exchange rate being good, they are already hedged back to USD at around 79 cents, (from annual accounts)



-------

SCF 15/10/2009 HALT

REL: 1447 HRS South Canterbury Finance Ltd

HALT: SCF010: Trading Halt of Securities

15 October 2009

NZX Regulation Announcement South Canterbury Finance Ltd (SCF010, SCF020, SCF030 and SCFHA) Trading Halt of Securities

NZX Regulation advises that, at the request of South Canterbury Finance Ltd, a trading halt has been placed on SCF securities trading on the NZDX, effective immediately.

The trading halt has been place pending a material announcement relating to the company.

The halt will remain in place until the announcement is released.

ENDS End CA:00186352 For:SCF Type:HALT Time:2009-10-15:14:47:18

--------

SNOOPY

[Misc]

Hard to imagine the news will be anything but BAD! Writing has been on the wall for 6 months.

M

[minimoke]

A month ago they were going to appoint 2 new independent directors. No news on that so perhaps the 2 are having second thoughts on joining. If it had looked rosy it surely it wouldn't take so long to sign them up.

[QOH]

SCF
15/10/2009
GENERAL

REL: 1743 HRS South Canterbury Finance Ltd

GENERAL: SCF: South Canterbury Finance - Update on restructuring

15 October 2009

South Canterbury Finance - Update on restructuring

South Canterbury Finance is pleased to make the following announcements to
its investors and the market.

The Company has reached agreement in principle on repayment terms with the
five noteholders who invested pursuant to the Company's $US100 million
Private Placement facility (USPP).

The agreement provides for the principal to be repaid over the next 5.5
months. The Trustee for South Canterbury Finance debenture stock investors,
Trustee Executors Limited, and ratings agency Standard and Poor's, have been
briefed on the arrangement. Documentation is in the process of finalisation.
Unwinding currency swap hedges on the USPP facility will release cash for
South Canterbury Finance.

USPP investors were able to seek immediate repayment of their notes when
certain covenants were breached following release of South Canterbury
Finance's audited financial statements for the year to June 2009.

The Company is now moving to register a new prospectus for the issue of
debenture stock and deposits. The Company continues to have the benefit of a
Crown guarantee under the government's retail deposit guarantee scheme in
respect of its debenture stock and deposits that mature, or otherwise become
payable on or before 11 October 2010.

The Company also intends applying to participate in the extended deposit
guarantee scheme announced by the Government on 22 August 2009. In order to
be accepted into the extended Crown guarantee scheme, the Company will need
to meet certain eligibility criteria and be accepted for participation by the
Secretary to the Treasury.

South Canterbury Finance has cancelled by mutual agreement with its banks the
$100 million standby credit facility. This facility was undrawn.

A new credit facility for $75 million with a new third party provider is in
the final stages of being arranged and is expected to become effective over
the next week.

South Canterbury Finance is continuing to work with its principal
shareholder, Southbury Group Limited and its advisors, Forsyth Barr and
Harmos Horton Lusk, on a restructuring and recapitalisation programme for the
group. This will include the appointment of new independent directors to
South Canterbury Finance. Further details will be announced as they are
finalised.

For further information please contact:

Lachie McLeod 0294 723 463
Chief Executive
South Canterbury Finance
End CA:00186369 For:SCF Type:GENERAL Time:2009-10-15:17:43:52

[Xerof]

The critics have gone quiet.....you all thought the receivers had been called in didn't you?

seems to me they are working through the reconstruction process, slowly but surely, and under immense pressure I guess

DOC, not sure the Cap raising will be directly into SCF - probably Southbury, who then infuse it into SCF. I think the culture of it being Hubbard's piggy bank is too deeply embedded and they want to take all the profits (once back to being profitable) directly back to Southbury. Investors get their interest, no less, no more.

[Balance]

The critics have gone quiet.....you all thought the receivers had been called in didn't you?

seems to me they are working through the reconstruction process, slowly but surely, and under immense pressure I guess

DOC, not sure the Cap raising will be directly into SCF - probably Southbury, who then infuse it into SCF. I think the culture of it being Hubbard's piggy bank is too deeply embedded and they want to take all the profits (once back to being profitable) directly back to Southbury. Investors get their interest, no less, no more.

Big yawn really. All the talk about constructive and positive discussions with the USPP noteholders and they demand their money out first - pronto.

But realistically, what were the USPP noteholders going to do? Pull the plug and have a messy work-out? Better to give SCF 5.5 months and have NZers bail them out with government guaranteed depositors' money. Good one!

SCF is simply buying time - but it could be that time will solve the company's problems. A reflating economy can do wonders for property exposure.

Time will not change the fact though that SCF is no more than just a South Island finance company without any real expertise in lending and has also been used as Hubbard's piggy bank. Worse that he chose to use it when the writing was on the wall. Reckless and contemptous of market reality.

I cannot see a 'white knight' being prepared to put up with that kind of nonsense.

[Alan3285]

With the prefs down to 24c or thereabouts, is it best to stay in there do you think?

Whilst the pref share holders have been hit hard (if they bought at $1 par), the past is the past, and getting out today means giving up a current yield of more than 25% pa - that seems pretty good to me!

The replacement of the $100m facility with a new $75m one (plus liquidation of some forex hedges relating to the $100m) seems like a bit of a non-story to me - it just removes the uncertainty around the $100m I suppose.

What would you do? Stay in the prefs, sell out, or even increase holdings at 25% yield?

Thanks,

Alan.

[Dr_Who]

You would be a tough nut to make a call on this one. I dont think there is a broker out there that would put his/her nut making a call.

Would the Doc buy this... NO! Why? Anyone that dips their pen in company ink is a NO NO in my books and will not get the Doc's support.

disclosure: not a shareholder

I also think Xerof and Balance have summed it up nicely.

[QOH]

With the prefs down to 24c or thereabouts, is it best to stay in there do you think?

Whilst the pref share holders have been hit hard (if they bought at $1 par), the past is the past, and getting out today means giving up a current yield of more than 25% pa - that seems pretty good to me!

The replacement of the $100m facility with a new $75m one (plus liquidation of some forex hedges relating to the $100m) seems like a bit of a non-story to me - it just removes the uncertainty around the $100m I suppose.

What would you do? Stay in the prefs, sell out, or even increase holdings at 25% yield?

Thanks,

Alan.
Personally I'd stay in, especially if I bought them at $1, wouldn't buy any more though. I 'm going to hang in with my 2011 and 2012 debentures at this point too.

[Alan3285]

Personally I'd stay in, especially if I bought them at $1, wouldn't buy any more though. I 'm going to hang in with my 2011 and 2012 debentures at this point too.


Hi Qoh,

Does it really make any (rational) difference whether you bought them at $1.00 two years ago, or $0.23 yesterday. Right now, you can sell for $0.29. Surely it is the yield, and expected future movements that matter, not your purchase price?

Or am I missing something?

Thanks,

Alan.

[Misc]

Alan , as part of any recapitalisation the prefs will likely be converted to ordinary shares , imo .

M

[Xerof]

Yes, thats my view too Misc, but that depends on who raises the capital, SCF or Southbury - see earlier ramblings

[Alan3285]

Alan , as part of any recapitalisation the prefs will likely be converted to ordinary shares , imo .

M

Hi Misc,

That will be interesting. Would they have to convert are par value ($1.00 each)? If so, then the pref share holders would receive $1.00 of market value of new, ordinary shares, for each $1.00 (nominal) of prefs they hold?

If we assume, for the sake of discussion, that the recapitalisation is done by way of a public offering, then effectively the pref shares would actually migrate towards a market value of $1.00 each?

Is that right?

Thanks,

Alan.

[Misc]

Alan , the Co is insolvent , and desperately needs new capital to survive , therefore any 'white-knight' will call all the shots , pref holders will likely have to vote to convert to ordinary shares , or the Company folds ... Hobsons Choice!

Possibly even the 2011 and 2012 Bonds may also be converted to ordinary equity ?

M

[Alan3285]

Alan , the Co is insolvent , and desperately needs new capital to survive , therefore any 'white-knight' will call all the shots , pref holders will likely have to vote to convert to ordinary shares , or the Company folds ... Hobsons Choice!

Possibly even the 2011 and 2012 Bonds may also be converted to ordinary equity ?

M

Hi Misc,

Why do you say it is insolvent?

The latest financials (published a few weeks ago, for the year to 30 Jun 2009) do not indicate that.

The auditors gave the technical 'uncertainty' statement, but they would have had no choice but to effectively offer 'no opinion' which is what that really means, since the $100m of financing was repayable on demand. That meant that SCFs going concern status was dependent on the US investors not making that demand.

The announcement yesterday that they are replacing the $100m of loans (repayable on demand) with $75m (we don't know yet, but maybe not repayable on demand) would seem to say that they are fine?

If they sit tight and stop lending, and just take in the repayments on existing loans, then they should be fine (albeit much smaller!) over time?

Thanks,

Alan.

[COLIN]

Hi Qoh,

Does it really make any (rational) difference whether you bought them at $1.00 two years ago, or $0.23 yesterday. Right now, you can sell for $0.29. Surely it is the yield, and expected future movements that matter, not your purchase price?

Or am I missing something?

Thanks,

Alan.

Alan: You are absolutely right, and this is a point that many investors fail to grasp, irrespective of the particular investment. Whatever has been paid for a particular security is history and is utterly irrelevant to today's decision-making processes (ignoring CGT and other tax considerations, of course).

I have not contributed to the ongoing discussion on SCF for a few days as I am growing rather weary of all the would-be funeral undertakers - they could scarcely contain their glee when the company went into a trading halt yesterday, only to be bitterly disappointed that its death was not subsequently announced; instead, sensible progress is being made towards a more solid future. SCF will not be allowed to fail - and I make that statement advisedly. It is certainly not "insolvent" by the accepted definition of that term. And snide remarks like "South Island brokers pushing South Island investments" are uninformed and unwarranted - why not similarly dismiss "North Island brokers pushing North Island investments"?

I also happen to agree with the observation that it is quite possible that preference shareholders may be given the opportunity to convert to ordinary shares. Remember, this was being given consideration when Alan Hubbard first conceived of a public issue of securities a few years ago but he then backed away from the idea. With the benefit of hindsight he probably now wishes he had gone ahead with that proposal at the time.

My own considered view is that the present depressed prices of each of the listed SCF securities offer great opportunities for those who are prepared to venture their arm.

[Balance]

I have not contributed to the ongoing discussion on SCF for a few days as I am growing rather weary of all the would-be funeral undertakers - they could scarcely contain their glee when the company went into a trading halt yesterday, only to be bitterly disappointed that its death was not subsequently announced; instead, sensible progress is being made towards a more solid future. SCF will not be allowed to fail - and I make that statement advisedly. It is certainly not "insolvent" by the accepted definition of that term. And snide remarks like "South Island brokers pushing South Island investments" are uninformed and unwarranted - why not similarly dismiss "North Island brokers pushing North Island investments"?



Nobody will and should ever argue that NZ needs companies like SCF. Especially with the finance sector now controlled by the freaking Australians who care not a hoot about NZ businesses.

That does not mean however that NZers should blindly support any NZ finance company - especially when the company contemptously (in my view) uses the public's money for private purposes.

SCF has to change dramatically and this crisis is good if SCF learns from it. What does not kill it will make it stronger.

A few points :

1. When a company cannot meet its obligations when they are due or are called, are they not 'insolvent'?

2. Are you comfortable depositing money with a company which is reliant upon a short-term crown guarantee to fund long term lending?

3. The reference to SCF as a South Island company is and was used extensively by certain brokers to differentiate it from other finance companies - that it is conservatively run etc. Suddenly it's not okay to refer to SCF in the same light?

SCF has 5.5 months to recapitalize and become strong again. Let's hope it has learnt a valuable lesson.

[temuk]

A few points :

1. When a company cannot meet its obligations when they are due or are called, are they not 'insolvent'?

No they are not. insolvent is when liabilities are greater than assets.

[Balance]

A few points :

1. When a company cannot meet its obligations when they are due or are called, are they not 'insolvent'?

No they are not. insolvent is when liabilities are greater than assets.

Disagree. Insolvency test now includes a company's ability to meet obligations as they are due.

[Grimy]

I have not contributed to the ongoing discussion on SCF for a few days as I am growing rather weary of all the would-be funeral undertakers - they could scarcely contain their glee when the company went into a trading halt yesterday, only to be bitterly disappointed that its death was not subsequently announced; instead, sensible progress is being made towards a more solid future.


Couldn't agree with you more Colin. Whatever the outcome (and I hope it is positive) a little less blood-lust please.............

[Misc]

Currently , SCF cannot repay the USPP .... of course that might change , but as of now (and as flagged in the accounts) the company is insolvent. Period.

M

[temuk]

Disagree. Insolvency test now includes a company's ability to meet obligations as they are due.

yes you are right.

accounting practices (ruth mcintosh) page 370

"INSOLVENCY occurs when a person or bussiness is unable to pay debts as they fall due."

[COLIN]

yes you are right.

accounting practices (ruth mcintosh) page 370

"INSOLVENCY occurs when a person or bussiness is unable to pay debts as they fall due."

As a Chartered Accountant I am fully aware of the accepted technical definition of insolvency but, having renegotiated the US Private Placement repayment terms, SCF cannot be classed as "insolvent" on that score. How many other publicly-listed companies have re-negotiated their debt facilities, particularly in recent times? For instance, PGG Wrightson? Think about it.

[Alan3285]

1. When a company cannot meet its obligations when they are due or are called, are they not 'insolvent'?

Hi Balance,

That is correct, but it does not, at this or any time in the recent past at least, apply to SCF.

The $100m 'facility' was repayable on demand. If such a demand had been made, then it might have become insolvent at that point in time, however no such demand was made, and hence it was not insolvent.

That is why the auditors declined to express an opinion either way on the 'going concern' status of SCF at the time they signed off the audit report (using the term 'fundamental uncertainty').

The more I think about it, and subject to the details of the new $75m facility, it appears to me that SCF is now on solid ground, and the yield that we were getting last week (25% pa +) on the prefs was excellent value. I would expect the price to increase / yield to fall this week a little pending the details of the new facility. If is looks 'good' then I would expect that yield to fall further - probably at least back to the mid to high teens , implying a price of around 35c or more for the perpetual prefs?

Alan.

[Xerof]

I mentioned this some time ago.......

IF you believe SCF can come through this difficult period, with sufficient capital, a credit re-rating to investment grade, possibly a re-invigorated management, and certainly, a better attitude to how it runs its business, then the SCFHA's are a stunning buy.

Remember they are Perpetuals, with an annual rate reset, so we need to look past the current coupon of 5%ish, to assess what a longer term yield might be at the current price of 32/35 cents

If the coupon averages anything like "normal" NZ yields plus the 2.3% margin, lets say 9/10%, then the long run average yield will perpetually be nearer 28/30%

There are a lot of IF'S to be sorted but those are the sort of parameters we are looking at based on todays price.

Not a bad risk/return......

[Balance]

Hi Balance,

That is correct, but it does not, at this or any time in the recent past at least, apply to SCF.

The $100m 'facility' was repayable on demand. If such a demand had been made, then it might have become insolvent at that point in time, however no such demand was made, and hence it was not insolvent.

That is why the auditors declined to express an opinion either way on the 'going concern' status of SCF at the time they signed off the audit report (using the term 'fundamental uncertainty').

The more I think about it, and subject to the details of the new $75m facility, it appears to me that SCF is now on solid ground, and the yield that we were getting last week (25% pa +) on the prefs was excellent value. I would expect the price to increase / yield to fall this week a little pending the details of the new facility. If is looks 'good' then I would expect that yield to fall further - probably at least back to the mid to high teens , implying a price of around 35c or more for the perpetual prefs?

Alan.

Nice for SCF to read that there's still blind faith out there.

SCF was insolvent - the USPP holders demand repayment and SCF could not pay. That is a fact. Now SCF has 5.5 months to pay.

Where is it going to get its money from? From the NZ public no less under a short term, government guarantee. But its assets (lending) are long term.

As I wrote before, the market is not dumb or fooled. That's why the yield is so high.

If you are such a believer in its survivability, its bonds are the best buy in the market. Go for it.

[temuk]

I have missed something here!!!!

when have the USPP holders demanded repayment of the bonds?

[Balance]

I have missed something here!!!!

when have the USPP holders demanded repayment of the bonds?

You think SCF willingly agreed and volunteered to repay the loan? When it is in such deep financial crisis?

[temuk]

you havn't answered the question.

[Balance]

you havn't answered the question.

The USPP holders demanded repayment as they were entitled to once SCF breached its investment grade rating.

SCF could not pay or has negotiated a 5.5 months period to repay.

You want SCF to tell you that? Same company which has been piling on related party transactions without letting the market know?

Read the NBR.

[QOH]

You should be fine if your debenture is covered by the government guarantee. There's something dreadfully wrong with the listed bonds trading at 20% and 30%. Market is saying that SCF's guarantee could be void?

Amazing the company is not coming out and saying something.

Balance do you consider things have got considerably worse since you wrote the above post?
If you held 2011 and 2012 debentures, would you get out of them now?

[Balance]

Balance do you consider things have got considerably worse since you wrote the above post?
If you held 2011 and 2012 debentures, would you get out of them now?

Things have definitely got better for SCF - but there is still a long road ahead for the company.

I would not get out if I had the bonds. Not at this kind of yield if you have them. Watch for the next piece of good news and then, look to get out.

Money is too hard earned to leave it in a company which totally ignored market reality. I still cannot get my mind around how the related party transactions kept growing in the last year when the market clearly said it did not want to see such transactions. Something stinks very badly.

[QOH]

Thanks Balance.

[Xerof]

Balance, the issue of related party transactions is also my major concern - as you say, smelly and probably nest feathering.

I also thought the announcement saying Southbury had injected 40m in equity, but failing to directly mention that Southbury had also sold 75m of dairy farms to SCF was disrespectful and arrogant.

[Balance]

Balance, the issue of related party transactions is also my major concern - as you say, smelly and probably nest feathering.

I also thought the announcement saying Southbury had injected 40m in equity, but failing to directly mention that Southbury had also sold 75m of dairy farms to SCF was disrespectful and arrogant.

One suspects that SCF has been spinning so much bs over the years and got away with the spin, they thought they could keep spinning.

Reality caught up with them.

[Misc]

Any thoughts that SCF was a 'conservative South Island lender' went flying out the door when they 'loaned' CEO McLeod $15m to buy SCF shares ...imo

The reported interest rate is 6% , so where does he find $900kpa to fund this ...?? Capitalised no doubt ,, just gets worse.

M

[zigzag]

They should buy Crafarms, amalgamate it with Dairy Farms and do an IPO. There's demand out there for food/protien, especially out of Asia. The cash would help them get their books in order. Anyway, that's the jist of an article I read in the mag. section of the local supermarket.

[macduffy]

They should buy Crafarms, amalgamate it with Dairy Farms and do an IPO. There's demand out there for food/protien, especially out of Asia. The cash would help them get their books in order. Anyway, that's the jist of an article I read in the mag. section of the local supermarket.

I can't see anyone wanting to take on the task of amalgamating anything with Crafarms and trying to float the result. Too many bad vibes there at present I would have thought.

[Alan3285]

I'm with Balance on this now.

I bought the prefs at 23c last week, giving me a yield (on cost) of more than 25%.

I could sell out 2/3 of them now and have no net cost (if you want to look at it that way).

If they get back up to the dizzy heights of a 50% discount, then I will have doubled my money, and still be getting the 25% yield (on cost).

I suspect I'll wait for the next bit of good news and bail out in the high 30s or low 40s, but either way it seems very unlikely they'll go below the 23c I paid unless the whole thing goes totally belly up.

Alan.

[Balance]

Sounding confident. Wishful thinking - current management team knows as much about banking as Colin Meads about 'Solid As'.

SCF 'to become a bank'
The Press Last updated 05:00 19/10/2009

Long-standing Timaru finance company South Canterbury Finance could become a bank within five years.

South Canterbury Finance's chief executive, Lachie McLeod, said it would make sense for the company to become a bank.

"In the timeframe, yes there's no doubt about that [possibility of moving to bank status]. It certainly hasn't been on our short-term radar," Mr McLeod said.

"With the (tougher) non-bank regulations coming in, it's certainly an option."

The finance company is also held up by some as a necessary competitor to the Australian-owned banks, giving affordable loans to the small and medium operators in the towns and rural hinterland of the South Island.

Financial commentator and SCF investor Chris Lee added that down the track he saw SCF and perhaps other "best quality" non-banks (like Marac) joining together to be a South Island bank: "Ultimately [I hope] the South Island brings together some very decent organisations to provide a facility New Zealand badly needs, which is a South Island bank."

Last Thursday SCF announced it had been given some breathing space in its long-awaited recapitalisation plan by being allowed to make gradual repayments on US$100 million owed to US investors. The in-principle agreement means five noteholders who invested in the US$100m private placement facility will be paid back over 5 1/2 months, with the first unspecified payment due next week.

International ratings agency Standard and Poor's put SCF's already downgraded BB+ rating on creditwatch negative, meaning a one-in-two chance of a further lowering of its credit rating in the three months to December 21.

Meanwhile, SCF continues to look to claw back loans that have gone sour. The company as mortgagee was in possession and looking to sell the old Dunedin Post Office building for about $7m, Mr McLeod said.

It is also yet to disclose firm options on a recapitalisation that could raise between $150m and $400m.

The market has speculated that SCF owner, the Southbury Group, could float part of its business, with another option being capital input from new investors. A beefed-up management team is also likely, Mr McLeod confirmed.

[Alan3285]

Sounding confident. Wishful thinking - current management team knows as much about banking as Colin Meads about 'Solid As'.

SCF 'to become a bank'
The Press Last updated 05:00 19/10/2009

{Snipped Article}



I agree - they will have to bring in new management to supplement and / or partially replace the existing team if they walk down that path.

Alan.

[temuk]

The USPP holders demanded repayment as they were entitled to once SCF breached its investment grade rating.

SCF could not pay or has negotiated a 5.5 months period to repay.

You want SCF to tell you that? Same company which has been piling on related party transactions without letting the market know?

Read the NBR.

I have taken the liberty of ringing Lachie.

At no time have SCF been insolvent.

The USPP bond holders have not recalled them, SCF are repaying them.

And to save you reading tomorrows paper the new investment statement will be out
tomorrow.

[Alan3285]

I have taken the liberty of ringing Lachie.

At no time have SCF been insolvent.

The USPP bond holders have not recalled them, SCF are repaying them.

And to save you reading tomorrows paper the new investment statement will be out
tomorrow.

LOL.

To be honest, I think that was pretty obvious.

If they had been subject to a repayment demand it would have been a material event that would have had to be disclosed to the market.

The only way anyone could think otherwise would be to suggest that the directors breached listing rules. If someone had evidence of that they should most certainly bring it out into the open, but I do not believe that such a situation arose in the recent past.

Alan.

PS: From 23c, prefs were traded today at 35c (as of 3:55pm) giving a 50% gain in three trading days, so the market seems to view the announcement last week positively. I am currently viewing 35 - 40 c as being a fair value with upside potential.

[temuk]

[QUOTE=Alan3285;278209]LOL.

To be honest, I think that was pretty obvious.

If they had been subject to a repayment demand it would have been a material event that would have had to be disclosed to the market.

The only way anyone could think otherwise would be to suggest that the directors breached listing rules. If someone had evidence of that they should most certainly bring it out into the open, but I do not believe that such a situation arose in the recent past.

Alan.


balance might like to ring NZX and report it

[Balance]

[QUOTE=Alan3285;278209]LOL.

To be honest, I think that was pretty obvious.

If they had been subject to a repayment demand it would have been a material event that would have had to be disclosed to the market.

The only way anyone could think otherwise would be to suggest that the directors breached listing rules. If someone had evidence of that they should most certainly bring it out into the open, but I do not believe that such a situation arose in the recent past.

Alan.


balance might like to ring NZX and report it

Laughing Out Very Very Loud. And you think the NZX cares a stuff about investors? Have you seen one single NZX price inquiry as the yield on SCF bonds kept blowing out and the value of the bonds keep dropping?

Also, SCF must now be the biggest laughing stock in the Western financial world - it is repaying US$100m of debt when it is in dire straits without the lenders requiring/demanding repayment. Wow!

[POSSUM THE CAT]

Balance maybe they just demanded a very large increase in the interest rate as I beleive they were entittled to after credit rating downgrade & that was more unpallitable than paying it back

[Alan3285]

Laughing Out Very Very Loud. And you think the NZX cares a stuff about investors? Have you seen one single NZX price inquiry as the yield on SCF bonds kept blowing out and the value of the bonds keep dropping?

Also, SCF must now be the biggest laughing stock in the Western financial world - it is repaying US$100m of debt when it is in dire straits without the lenders requiring/demanding repayment. Wow!

I would just like to point out that what you seem to have quoted me saying, I did not say (about you phoning the NZX) although if you know something then I would support you doing so.

However, on your point above, I wonder if there has been some misunderstanding?

I believe that SCF said they were replacing the $100m facility with a new one of $75m (and in the process unwinding some hedges that will free up additional cash)?

If so, it seems to me that re-financing is hardly an unusual thing for any business if they can get a 'better deal' (lower costs, better terms or whatever), and in doing so, the original facility would usually be repaid even if the lender had not specifically demanded repayment?

Thanks,

Alan.

[minimoke]

I believe that SCF said they were replacing the $100m facility with a new one of $75m (and in the process unwinding some hedges that will free up additional cash)?

Or is it USD$100m and NZD$75m?

[Billy Boy]

Good post alan
Many wont get the point though....
BB:)
ps coz they wont want too !!!

[Alan3285]

Or is it USD$100m and NZD$75m?

The way the USD is falling over in the last few months it could be a good time to repay the USD and re-borrow in NZD!

Parity Party??

Alan.

[temuk]

I would just like to point out that what you seem to have quoted me saying, I did not say (about you phoning the NZX) although if you know something then I would support you doing so.
Thanks,

Alan.


sorry Alan, it didn't come up highlighted no mallice intended.

[Balance]

I would just like to point out that what you seem to have quoted me saying, I did not say (about you phoning the NZX) although if you know something then I would support you doing so.

However, on your point above, I wonder if there has been some misunderstanding?

I believe that SCF said they were replacing the $100m facility with a new one of $75m (and in the process unwinding some hedges that will free up additional cash)?

If so, it seems to me that re-financing is hardly an unusual thing for any business if they can get a 'better deal' (lower costs, better terms or whatever), and in doing so, the original facility would usually be repaid even if the lender had not specifically demanded repayment?

Thanks,

Alan.

101% wrong. The $75m new facility is to replace thev$100m facility cancelled by the banks. Nothing to do with the US$100m.

tp://www.nbr.co.nz/article/south-canterbury-finance-reaches-agreement-with-us-investors-113436

[temuk]

South Canterbury Finance has cancelled by mutual agreement with its banks the
$100 million standby credit facility. This facility was undrawn.

A new credit facility for $75 million with a new third party provider is in
the final stages of being arranged and is expected to become effective over
the next week.


I copied this from the announcement 15-10-09

[Alan3285]

101% wrong. The $75m new facility is to replace thev$100m facility cancelled by the banks. Nothing to do with the US$100m.

tp://www.nbr.co.nz/article/south-canterbury-finance-reaches-agreement-with-us-investors-113436


Hi Balance,

Please can you explain your logic in more detail as it appears wrong.

SCF had two $100m facilities. One was never drawn on, and was removed last month. The second one was fully drawn (or at least $100m drawn).

They are repaying that second one (over five or six months) and putting in place a new facility ($75m) plus liquidating some forex hedges that will free up some additional millions.

Is one of those facts wrong?

Thanks,

Alan.

[Alan3285]

sorry Alan, it didn't come up highlighted no mallice intended.

No problem at all.

Thanks for the clarification post.

Alan.

[COLIN]

LOL.

To be honest, I think that was pretty obvious.

If they had been subject to a repayment demand it would have been a material event that would have had to be disclosed to the market.

The only way anyone could think otherwise would be to suggest that the directors breached listing rules. If someone had evidence of that they should most certainly bring it out into the open, but I do not believe that such a situation arose in the recent past.

Alan.

PS: From 23c, prefs were traded today at 35c (as of 3:55pm) giving a 50% gain in three trading days, so the market seems to view the announcement last week positively. I am currently viewing 35 - 40 c as being a fair value with upside potential.

Alan, thank you for your well-considered and factual input into the debate - dare I say "balanced"! I had given up trying to make the point that no evidence had been produced that SCF was insolvent. Directors who allow a company to continue trading when in that state render themselves wide open to penalties.

[Balance]

Alan, thank you for your well-considered and factual input into the debate - dare I say "balanced"! I had given up trying to make the point that no evidence had been produced that SCF was insolvent. Directors who allow a company to continue trading when in that state render themselves wide open to penalties.

You guys cannot even read properly the announcement from SCF re the US$100m USPP and the $100m bank debt facility. Let alone between the lines.

No wonder SCF thought that it could keep fooling the market.

Colin Meads : "Solid As".

[minimoke]

Alan, thank you for your well-considered and factual input into the debate - dare I say "balanced"! I had given up trying to make the point that no evidence had been produced that SCF was insolvent. Directors who allow a company to continue trading when in that state render themselves wide open to penalties.
Directors have a couple of pertinent resoonsibilites - one is to not enter into an obligaiton knowing reasonably that it can't be met when that obligation is due to be met. I presume that at the time the $100m facility was organised the Directors felt that they could meet any obligations at the time those obligatiosn were due to be met. Like wise with the new $75m they must figure they can meet whatever obligations have been arranged.

They can also continue to trade while being insolvent - they can't do it recklessly and they probably can't do it for long. It sounds like the $100m was able to be paid when it fell due so SCF wern't insolvent - and even if they were the directors could still trade and come up with some arrangement in the meantime.

On the face of it the Directors appear to be doing what could reasonably be expected of them so its pretty unlikly any penalites could be anticipated.

[Alan3285]

Hi All,

Kicking off the new forum with a discussion on SCFHA.

Currently they are trading at or about 35c giving a gross yield of about 16% by my calculations (5.61% at 35% ~ 16%).

This seems pretty good compared to the yield they announced today with the release of a new prospectus (8%):

http://www.stuff.co.nz/business/industries/2983635/SCF-offering-new-debentures

The big difference is that the debentures are govt guaranteed though, so not really comparable.

So, do you think it is time to sell out at 35c / 16%?

Alan.


Disclosure: I hold SCFHA.

[Balance]

This is more like it.

As long as Hubbard and management stop using SCF as their own piggy-bank and there is a real independent board (not cronies appointed by Hubbard), SCF could yet be NZ's next bank.

http://www.stuff.co.nz/business/market-data/2985049/Sth-Canterbury-Finance-intends-to-wind-back-loan-book

[minimoke]

This is more like it.

As long as Hubbard and management stop using SCF as their own piggy-bank and there is a real independent board (not cronies appointed by Hubbard), SCF could yet be NZ's next bank.

http://www.stuff.co.nz/business/market-data/2985049/Sth-Canterbury-Finance-intends-to-wind-back-loan-book

Have I gort this right.
The USD$100m is now USD$115m

Its going to be repaid by a new NZ$75 facility which hasn't been agreed yet.

A further NZ$40 - $75m will hopefully come from selected investors.

They will be selling dairy farms. (into a market where values seem depressed and there are loads of water resource consent issues that aren't resolved and not looking great).

Property loans are being wound down. At a time when there appears to be a more positive view of property.

And $46m is held in trust but some investors are choosing to withdraw their money.

[Alan3285]

This is more like it.

As long as Hubbard and management stop using SCF as their own piggy-bank and there is a real independent board (not cronies appointed by Hubbard), SCF could yet be NZ's next bank.

http://www.stuff.co.nz/business/market-data/2985049/Sth-Canterbury-Finance-intends-to-wind-back-loan-book

I totally agree with you.

If they are serious about potentially heading towards bank status, and it *appears* that they are from what they have said, then they have to get their disclosure issues sorted, and also put in place internal controls to stop any related party transactions being done without transparency (of process).

I have no issue with SCF making a small loan (relative to the entire SCF book) to a company that Hubbard has a stake in, but it should be done entirely independently of any interests within SCF and probably more conservatively than to any unrelated parties in terms of lending criteria and collateral.

Alan.

[Alan3285]

Have I gort this right.
The USD$100m is now USD$115m

I thought I read that the US$15m was Southbury's cost - not SCF? Was that wrong?



Its going to be repaid by a new NZ$75 facility which hasn't been agreed yet.

A further NZ$40 - $75m will hopefully come from selected investors.

Again - I thought that was going into Southbury, so not directly available to SCF? If so, then on that point things are worse for SCF?



They will be selling dairy farms. (into a market where values seem depressed and there are loads of water resource consent issues that aren't resolved and not looking great).

Looks to me like a good time to get out dairy farms with falling yields (NZD strength for starters), and the farmers shooting themselves in the foot with respect to financing of Fonterra.


Property loans are being wound down. At a time when there appears to be a more positive view of property.

Not from anyone that seems to have a clue. Does no-one learn from history? Why is it that every single cycle there are so many people who are willing to believe that 'this time it is different because.....'??

Remember how the PEs in the tech boom were entirely justified because the economics of the tech industry were totally different? Funny how the same thing was said about almost every other boom.

If you want to see whether a market is over inflated, just look at the yields. If you can't borrow 100% and at least break even, then get out or stay out, since you are making less money on an 'equity' investment than the lender is on secured debt.

Ah well, good for some I guess.


And $46m is held in trust but some investors are choosing to withdraw their money.

Correct. No idea what proportion of the $46m will be put into SCF in the next few weeks. What do you reckon?


Thanks,

Alan.

[minimoke]

I thought I read that the US$15m was Southbury's cost - not SCF? Was that wrong?
According to teh newspaper article: " SCF will also pay a US$15m refinancing fee regarding the private placement"




Again - I thought that was going into Southbury, so not directly available to SCF? If so, then on that point things are worse for SCF?
Ah yes - it looks like it is the parent. But I'm wondering if this wil then be injected into SCF cos I'm wondering where SCF is getting the usd$115



Looks to me like a good time to get out dairy farms with falling yields (NZD strength for starters), and the farmers shooting themselves in the foot with respect to financing of Fonterra.




Not from anyone that seems to have a clue.
Perhasp its more a metter of timingh. Are tehy selling out in an appreciateing or depriciating market.



Correct. No idea what proportion of the $46m will be put into SCF in the next few weeks. What do you reckon?
Thats all going to depend on the S&P rating coming out soon. I don't think investors wil be rushing to pull the money to invest in Kathmandu - just can't see them in that demographic. But then the CE didn't mention the USD$15 refininacing fee in his press release the other day and they still haven't made progress on those independant directors. Perhasp there is enough good news to fill them with enough confidence to keep the money in.

[Alan3285]

Hi MiniMoke,




According to teh newspaper article: " SCF will also pay a US$15m refinancing fee regarding the private placement"



Looks like it depends on which report you read - this one is quite explicit that the US$15m is a liability of Southbury, and not SCF:




"The $US15 million penalty is to be paid through South Canterbury's parent Southbury Group Ltd, headed by Mr Hubbard, with no obligation to South Canterbury on the payment."



Full original article here:

http://www.odt.co.nz/print/78869


It does use the terminology 'paid through' which is a little ambiguous.

Given the (relative) specificity of that ODT article, I am guessing that it is not SCFs issue (the US$15m)?



Alan.

[winner69]

This comment from a reader on the NBR site under this story just michief .... but seems to make sense
http://www.nbr.co.nz/article/south-canterbury-finance-changes-gear-hubbard-seeks-75m-113741


New
So, next week they'll have no cash left?

NZ$41.3m in cash on 30 Sept, less US45m 25th Oct, leaves them with approx nothing next week?

With the level of stress indicated in their prospectus registered yesterday, they aren't far from another downgrade, which will make them ineligable for the extended govt guarantee, and SCF should be in receivership before Christmas.

[winner69]

SCF still Alans baby .... with money being raised through Southbury and Southbury injecting capital into SCF

[minimoke]

Hi MiniMoke,


Looks like it depends on which report you read - this one is quite explicit that the US$15m is a liability of Southbury, and not SCF:


Full original article here:

http://www.odt.co.nz/print/78869


Hi ALn
I'm clearly going to look a bit dense on this one.

Teh ODT articel says:" It {SCF} has also for the first time confirmed payment of a $US15 million ($NZ19.8 million) penalty, in the form of a refinancing fee, to a US lender which is calling in $US100 million ($NZ132.6 million) in loans, plus further unspecified interest charges."

I read this as being a liability of SCF but Southbury is paying it. I'll then go on to interpret this as SCF not having the USD$15 now to pay this penalty and it doeen't have it in the future - otherwise Southbury would surely want it back.

"Paid through" is very ambiguous - and a company wanting to secure investors loot can't IMO afford to let teh market see ambiguity. And now we have unspecified interst charges.

Edit - and a few posts earlier Temuk reckons he spoke to the CE who said the loans weren't recalled and that SCF were repaying them. Yet this ODT article suggests the US were calling in the loan. How to interpret? Who to believe? And they want to be a bank? Or is this a smokescreen?

[winner69]

Amazing that a company of this size and profile (and in turmoil) has had only 2 directors for a while now (Hubbard and Sullivan) .... obviously only need a quorum of 2 for a Board Meeting ... and you can sort of imagine how they go ... Hubbard says something and Sullivan agrees

Maybe that is why they are in turmoil

[Alan3285]

SCF still Alans baby .... with money being raised through Southbury and Southbury injecting capital into SCF

{Grin}

Clearly there are still risks, but that explains the yield of 24% that was on offer when I bought in at 23c.

I would likely sell out somewhere between 35 and 45c even though I did not purchase it as a speculative investment - I purchased for the yield.

Having said that, I may exit some at 35c and leave some in, effectively reducing my purchase price on the remainder down below 20c if you want to look at it that way (rather than considering the gain on what I sell as a profit) but this would be to rebalance my portfolio back to the kind of dollar investment that I was aiming to have in SCFHA in the first place.


Alan.

[Misc]

What a shambles ... good luck to anyone game enough to invest!!

http://www.stuff.co.nz/business/2986362/Arduous-road-ahead-for-SCF

[Alan3285]

Hi ALn
I'm clearly going to look a bit dense on this one.

Hardly - the reporting is pretty poor (probably par for the course in NZ unfortunately).


Teh ODT articel says:



" It {SCF} has also for the first time confirmed payment of a $US15 million ($NZ19.8 million) penalty, in the form of a refinancing fee, to a US lender which is calling in $US100 million ($NZ132.6 million) in loans, plus further unspecified interest charges."

I read this as being a liability of SCF but Southbury is paying it. I'll then go on to interpret this as SCF not having the USD$15 now to pay this penalty and it doeen't have it in the future - otherwise Southbury would surely want it back.

"Paid through" is very ambiguous - and a company wanting to secure investors loot can't IMO afford to let teh market see ambiguity. And now we have unspecified interst charges

I agree, but presumably that wording ("paid through") is from the ODT?

Perhaps the editor should have sent the journo back with their tail between their legs to re-word and / or clarify.


Alan.

[minimoke]

Hardly - the reporting is pretty poor (probably par for the course in NZ unfortunately).

Well I'm confused and edited the earlier post. But if there is confusion in the market and confusion in the press it is surely incumbent on the CE to step up and give very clear guidance.

[minimoke]

What a shambles ... good luck to anyone game enough to invest!!

http://www.stuff.co.nz/business/2986362/Arduous-road-ahead-for-SCF
So the first chunk has to be repaid this weekend? Thats when the Insolvency Test alluded to earlier will no doubt kick in.

[Alan3285]

Well I'm confused and edited the earlier post. But if there is confusion in the market and confusion in the press it is surely incumbent on the CE to step up and give very clear guidance.

To be honest, I don't know what their obligations, if any, are when uncertainty is created by an article that a private (unrelated) party publishes.

In this case it is the ODT, but they are (legally) no different to you or me or any of the thousands of blogs out there, any of which could publish something similar.

It seems unlikely to me that the issuer of a listed security has an obligation to address each and every article published anywhere, anytime that it is 'uncertain' or creates uncertainty (which is, itself, a subjective thing of course), but perhaps it is a listing rule that I am not aware of (which is quite possible)?

Alan.

[Billy Boy]

Hardly - the reporting is pretty poor (probably par for the course in NZ unfortunately).

I agree, but presumably that wording ("paid through") is from the ODT?
Perhaps the editor should have sent the journo back with their tail between their legs to re-word and / or clarify.
Alan.
.
IMO this type of communication (News Papers) should never be taken
as fact. Always verify their articals. They will never print corrections
unless legalities dictate. TV is worse.
eg. TV1. PR man a few years back after I challenged them. " our bizz is about entertainment, not education, so absolute fact is unnessary".
Some here might remember TV1 quoting NOG as being an Australian Coy,
when challenged,they replyed "you get your facts straight", Geeez
BB

[winner69]

......it is surely incumbent on the CE to step up and give very clear guidance.

Yeah right ... thats half the problem

This is how we do business in Timaru

[Alan3285]

IMO this type of communication (News Papers) should never be taken
as fact. Always verify their articals. They will never print corrections
unless legalities dictate. TV is worse.
eg. TV1. PR man a few years back after I challenged them. " our bizz is about entertainment, not education, so absolute fact is unnessary".
Some here might remember TV1 quoting NOG as being an Australian Coy,
when challenged,they replyed "you get your facts straight", Geeez
BB




I completely agree.

Alan.

[minimoke]

Amazing that a company of this size and profile (and in turmoil) has had only 2 directors for a while now (Hubbard and Sullivan)
One of those Directors is a Director of 83 other Companies. The other has signalled an intention to retire within 12 months. I'm glad that fills some with confidence.

[Balance]

Why beat up on the media? They have at least kept the market informed whilst SCF went about its merry way of using the public's money as its own piggy bank.

30% of SCF's loan book is interest-only and probably, capitalising interest loans. SCF was living in fool's paradise - a micky-mouse Timaru company using investors' money to join the big league of property development lending.

Them, there's the related party lending - a staggering $230m against real shareholders' funds of $110m. So Hubbard puts in $1 and takes out $2.30.

Good one.

SCF has a chance to get itself out of this mess - let's hope it takes it.

[GTM 3442]

Hi Alan,

I guess it depends how much you paid, and why you bought them.

SCFHA are a cheap way to get into floating-rate fixed interest.

I believe that we will have "high" inflation (+5%) in the short to medium term so the annual rate reset is an attractive feature.

The downside of SCFHA is the risk, but I suspect that the receivers will find more than 35c in the dollar should the time come.
Overall, I rather suspect that the SCFHA's (and many other HA's, come to that) were bought by people who had no idea what they were buying.

If you prefer fixed to annual resets, some of the BNZIS series are quite attractive on yield.

[Alan3285]

Hi Alan,

I guess it depends how much you paid, and why you bought them.



Good point. I bought at 23c and entirely for the yield which at that price was about 24% pa.





SCFHA are a cheap way to get into floating-rate fixed interest.

I believe that we will have "high" inflation (+5%) in the short to medium term so the annual rate reset is an attractive feature.



Yes - I agree and that was a factor in my thinking. They were yielding 24% at the time of purchase (16% today based on 35c), but that is with the interest rate at 5.61%.

If the 1 yr swap rate is, say, 7% next year (Oct 2010), then the nominal return will be 9.3% which will equate to a yield (on cost) of 40% or 26.5% on 35c (which is the price today).





The downside of SCFHA is the risk, but I suspect that the receivers will find more than 35c in the dollar should the time come.

Overall, I rather suspect that the SCFHA's (and many other HA's, come to that) were bought by people who had no idea what they were buying.



Interesting thought. I hadn't considered that. What other HAs are there on the market? Do you know how I can search that?





If you prefer fixed to annual resets, some of the BNZIS series are quite attractive on yield.



I couldn't find anything called BNZIS (but you do call it a 'series'). I found these:

BNSPA BNZ Income Securities 2 Limited Perpetual Non-Cumu
BNZ080 BNZ 15/06/17 8.42% Subordinated Bonds
BNZ090 BNZ 07/12/17 X.XX% Subordinated Bonds

Are those what you refer to?


Thanks,

Alan.

[winner69]

Why beat up on the media?

Agree Balance ... likes of SCF, PGW and PGC call the press speculative mischief .... but history would suggest that they are generally on the right track .... wheres there smoke theres fire as the old saying goes.

[Balance]

Agree Balance ... likes of SCF, PGW and PGC call the press speculative mischief .... but history would suggest that they are generally on the right track .... wheres there smoke theres fire as the old saying goes.

Compare what the press has written with the analysis of the apologists for SCF and Hubbard - many investors will be grateful for the press coverage.

It is telling that the listed bonds will not be covered by the govt g'ttee?

[winner69]

A remarkable story of survival

http://www.chrislee.co.nz/index.php?page=south-canterbury-finance-update

[Balance]

A remarkable story of survival

http://www.chrislee.co.nz/index.php?page=south-canterbury-finance-update

Big yawn. The biggest SCF's apologist tries and justifies how he could have got into SCF and the finance company sector so wrong and so donkey deep.

Hubbard put in $1 equity and took out over $2 in related party loans. SCF also bought investments and assets off Hubbard. Which part of that does Chris not understand?

Still, it's water under the bridge hopefully and SCF can successfully refinance itself.

[Misc]

Chris Lee LOL .... talk about 'Custer' talking his own book!! Shameful ,, would not be so funny if he had any credibility left .... most will see it for what it really is..imo
M

[Alan3285]

It is telling that the listed bonds will not be covered by the govt g'ttee?




Hi Balance,

Interesting point.

Do you know which listed bonds _are_ covered by government guarantees?

I would imagine the bank ones such as ASB / BNZ etc? How do we know?

Thanks,

Alan.

[Balance]

Hi Balance,

Interesting point.

Do you know which listed bonds _are_ covered by government guarantees?

I would imagine the bank ones such as ASB / BNZ etc? How do we know?

Thanks,

Alan.

See if you can make sense of this :

http://www.treasury.govt.nz/economy/guarantee/retail/qanda

Reads to me that if the bonds are/were issued directly to a retail investor, then it is covered.

If you buy the bond from an institution which is selling, it is not covered as the bond was not covered in the first place.

[minimoke]

A remarkable story of survival

http://www.chrislee.co.nz/index.php?page=south-canterbury-finance-update
So teh BNZ isn't prepared to lend to SCF. There has to be a yellow flag warning to investors there. It seems Chris Lee thinks SCF are home and hosed, the problems are all behind them and the future is rosy. Hopefully it is but I think he's calling it too ealry. The ducks SCF need to line up are not there yet - the only one so far is the release of the prospectus.

[Alan3285]

See if you can make sense of this :

http://www.treasury.govt.nz/economy/guarantee/retail/qanda

Reads to me that if the bonds are/were issued directly to a retail investor, then it is covered.

If you buy the bond from an institution which is selling, it is not covered as the bond was not covered in the first place.




Okay - it is not entirely clear what is covered, but I *would* say that no preference shares at all would be included including ASB, BNZ etc.

I think this section excluded any prefs:





What deposits are covered by the guarantee?

The guarantee will protect debt securities held by retail investors and issued by businesses covered by the guarantee.

Debt security means any interest in or right to be paid money that is deposited with or lent to another person.




That last line excludes any prefs from my reading, since it is not a loan or a deposit.

Do you think that is correct?

Thanks,

Alan.

[COLIN]

Okay - it is not entirely clear what is covered, but I *would* say that no preference shares at all would be included including ASB, BNZ etc.

I think this section excluded any prefs:





That last line excludes any prefs from my reading, since it is not a loan or a deposit.

Do you think that is correct?

Thanks,

Alan.

Absolutely correct

[Enumerate]

I have looked at the SCFHA's.

The main problem I have with them is the conditions of the Trust Deed.

- It is possible for the company to halt payments of interest, at its discretion
- The prefs could be made to pay 0%, indefinitely
- There is no recourse for holders to get any compensation or trigger a company windup.

Deeply, deeply subordinated ... a 5% yield is in no way real compensation for the risk. Hence the deep discount is appropriate.

Unfortunately, there are better opportunities elsewhere.

[winner69]

I have looked at the SCFHA's.

The main problem I have with them is the conditions of the Trust Deed.

- It is possible for the company to halt payments of interest, at its discretion
- The prefs could be made to pay 0%, indefinitely
- There is no recourse for holders to get any compensation or trigger a company windup.

Deeply, deeply subordinated ... a 5% yield is in no way real compensation for the risk. Hence the deep discount is appropriate.

Unfortunately, there are better opportunities elsewhere.

And they are fair way down the pecking order if it all turns to custard

[Alan3285]

Hi Enumerate,


I have looked at the SCFHA's.

The main problem I have with them is the conditions of the Trust Deed.

- It is possible for the company to halt payments of interest, at its discretion
- The prefs could be made to pay 0%, indefinitely
- There is no recourse for holders to get any compensation or trigger a company windup.




Are they cumulative though? Clearly these are shares, not loans, so I would not expect the company to have an 'obligation' to pay the dividends as that could be against the interests of the creditors of the company.

However, I understood that most prefs are cumulative which means that the dividends accumulate (but are not a liability) and must be paid prior to any dividend being paid to the ordinary shareholders? Hence them being 'preference' shares (rather than 'ordinary' shares)?

Are you able to point me to the trust deed - which I should have already read of course!?

I searched their site (scf.co.nz) but couldn't find it anywhere there.





Deeply, deeply subordinated ... a 5% yield is in no way real compensation for the risk. Hence the deep discount is appropriate.

Unfortunately, there are better opportunities elsewhere.




Clearly all the shares would be subordinate to any creditor - including unsecured creditors, but that is always the case I think?

The very name implies that they would stand ahead of the ordinary shares only?

The prospective yield though is currently much more than 5%. When I bought at 23c the yield was about 24% pa which was the market's assessment of fair compensation for the risk at that point in time.

Personally, I felt it was too good, hence I bought (although clearly for every buyer there is a seller too!) Since then the market has adjusted to reduce the risk premium to around 16% (at 35c price) through there being competition for the shares that have been offered for sale.

Having said that, I have reduced my holding to adjust back to the net invested value that I had at 23c, and thus taking out more than 40% of my cash investment, but still leaving in the same market value as on the day I bought.

I am thinking a good target price now is around 40c or a little more with a yield thereon of about 14% which compares to their deposit rates of around 7% - 8% (if you don't mind having your cash tied up and no rights to get out).

Having said that, there is definitely a risk attached - it just comes down to whether the risk / reward balance is right I guess.


Alan.

[temuk]

3. The BNZ, having borrowed heavily from SCF for many years, refused to lend to SCF under its standby facility in recent weeks. SCF has severed this arrangement and is now to finalise a $75m facility to replace the BNZ.
(In 2008, BNZ during a time of extreme pressure, borrowed more than $200m from SCF.)



Are BNZ still under "extreme pressure" and unable to lend to SCF?

Remember the tax dept is circling!
It only cost Westpac $940 (or so) Ma Ma million

[Alan3285]

3. The BNZ, having borrowed heavily from SCF for many years, refused to lend to SCF under its standby facility in recent weeks. SCF has severed this arrangement and is now to finalise a $75m facility to replace the BNZ.
(In 2008, BNZ during a time of extreme pressure, borrowed more than $200m from SCF.)



Are BNZ still under "extreme pressure" and unable to lend to SCF?

Remember the tax dept is circling!
It only cost Westpac $940 (or so) Ma Ma million




More likely they had to reduce their exposure to meet the capital adequacy rules, and pulling an unused facility from SCF was an easy option.

Given that it was only a stand-by for SCF then not a major relationship issue I would say. I think Chris Lee is overblowing the 'betrayal' angle, but then he is known for being very pro-SCF.


Alan.

[GTM 3442]

Hi Alan

I tend to have a look at the Direct Broking Fixed Interest pages - Rate Card & NZDX Securities.

For some reason, Perpetuals seem to be xxxHA (SCFHA, IFTHA, etc)

Re the BNZIS series

BNZ Income Securities Perpetual 9.89%
BNZ Income Securities 2 Limited Perpetual 9.10%

Regards

[Balance]

More likely they had to reduce their exposure to meet the capital adequacy rules, and pulling an unused facility from SCF was an easy option.

Given that it was only a stand-by for SCF then not a major relationship issue I would say. I think Chris Lee is overblowing the 'betrayal' angle, but then he is known for being very pro-SCF.


Alan.

Chris Lee is just trying to blame everyone else for SCF being in such ddep strife.

Betrayal? SCF leaves its float fund with the BNZ and then, expects the BNZ to lend it $100m so that SCF can buy more assets and lend more money to Hubbard and management?

Biggest BS I have read in a long time.

[Alan3285]

Hi GTM 3442,




Re the BNZIS series

BNZ Income Securities Perpetual 9.89%
BNZ Income Securities 2 Limited Perpetual 9.10%




Sorry for being dim, but can you confirm the tickers?

I found two BNZs I think (the BNZ090s appear to be delisted):


BNSPA - BNZ Income Securities 2 Limited Perpetual Non-Cumulatives (http://www.directbroking.co.nz/directtrade/dynamic/quote.aspx?QQSC=BNSPA&QQE=NZSE)

I assume these are the 9.10% ones?



BNZ080 - BNZ 15/06/17 8.42% Subordinated Bonds (http://www.directbroking.co.nz/directtrade/dynamic/quote.aspx?QQSC=BNZ080&QQE=NZSE)

These are being labelled as 8.42% rather than the 9.89% that you refer to? Are they the same ones?


Thanks,

Alan.

[COLIN]

Alan - try BISHA.

[Misc]

Why has this thread been moved??

Week nearly over ,,, USD45m due today ...... and still no sign of the NZD75m debt facility??

M

[sharer]

Why has this thread been moved?? M

See the head thread "NZDX ... "

[Alan3285]

Hi Misc,




Why has this thread been moved??

Week nearly over ,,, USD45m due today ...... and still no sign of the NZD75m debt facility??

M




I would guess because it fits more comfortably and logically under the new NZDX forum?

Not sure who decides - possibly Vince?


Alan.

[Alan3285]

Alan - try BISHA.




Got it!

I wish they would keep the tickers more consistent.

Surely everything to do with BNZ should be BNZxx (!)


Thanks for that.

Any further discussion on those, I'll start a new thread.

Alan.

[winner69]

Got it!

I wish they would keep the tickers more consistent.

Surely everything to do with BNZ should be BNZxx (!)


Thanks for that.

Any further discussion on those, I'll start a new thread.

Alan.

BISHA because the issuer is BNZ Income Securities Limited

[GTM 3442]

BISHA.NZX - BIS 00/00/00 9.89% BNZ Perpetual Non-Cumulative Securities

BNSPA.NZX - BNZ Income Securities 2 Limited Perpetual Non-Cumulatives

[Enumerate]

Apologies for the late response:

For the Trust Deed and all the formal filings ... go to the Companies Office site and look up South Canterbury Finance:

http://www.companies.govt.nz

This site is really interesting ... you can trace all the Trust Deeds and prospectus filings of any company. Just might have to load up the Trust or Limited Liability Company elements to track down the seat of an investments filing. Very useful site for the investment researcher's "bag of tricks".



Are they cumulative though? Clearly these are shares, not loans, so I would not expect the company to have an 'obligation' to pay the dividends as that could be against the interests of the creditors of the company.


No, my understanding is that they can freeze payments and not incur any obligation to accrue payment at any future date. The only thing that stops them from using the SCFHA as a zero rated loan is the Trust Deed provision that they cannot payout on the SCF ordinaries, while the SCFHA are zero rated. My fear is that if they are recapitalised ... the new shareholders would welcome a period of nil payouts while they rebuilt the SCF capital structures ... SCFHA would be used as cheap equity ... without any prospect of sharing in the upside.

I realise that this is a very low probability possibility ... it would significantly damage SCF from a future capital raising perspective. However, it is an "exposure" I am not comfortable with.

[POSSUM THE CAT]

Check new special offer on debentures on IRG group website I would say they are getting desperate www.equity.co.nz/ hope this is correct web address for the offer as it came by email.

[paul29]

South Canterbury Finance, will seek cover under the government's extended retail deposit guarantee after it released a new prospectus earlier this week.

The prospectus revealed chairman Hubbard came to the rescue of the finance company once more, and he has personally injected around a quarter of a billion dollars into South Canterbury over the past three years.

However, this will probably be the 81-year-old's last hurrah, as he announced he will be retiring as chairman within 12 months as the company brings on two independent directors to the board - one of whom will take up the role as chair - and bolster its management team.

The prospectus revealed the finance company will look to raise as much as $75 million in a private placement, and it is also considering selling off its dairy farming assets.

The prospectus was released after South Canterbury Finance organised a repayment plan in installments to U.S. investors owed US$100 million after the company's credit rating was down-graded to a BB+ and put on negative creditwatch. Hubbard's Southbury Group will foot the penalty to the tune of US$15 million.

South Canterbury Finance also reaffirmed its commitment to meeting the Reserve Bank's capital ratio requirements through the recapitlisation plan, and is confident that it will be taken off rating agency Standard & Poor's negative creditwatch after releasing the prospectus, allowing it to raise new funds.

Like Marac, South Canterbury Finance is moving away from property lending, which left a large hole in its financial statements due to impaired loans, though due to the lack of liquidity in the market it recognises this will be a gradual process.

It also said it would reduce its level of related party loans by at least $50 million.

[Balance]

South Canterbury Finance, will seek cover under the government's extended retail deposit guarantee after it released a new prospectus earlier this week.

The prospectus revealed chairman Hubbard came to the rescue of the finance company once more, and he has personally injected around a quarter of a billion dollars into South Canterbury over the past three years.



And how much did he take out by way of related party transactions? Have a guess.

What a lot of South Island BS.

[minimoke]

And how much did he take out by way of related party transactions? Have a guess.

What a lot of South Island BS.Um $220m to Hubbard and Directors (Hubbard being one of them). So that makes it $220ish from SCF to Hubbard by way of related part loans. And then a very generous $1/4b from Hubbard back to SCF. So in reality he might have stumped up with around $5m himself?

[Balance]

Um $220m to Hubbard and Directors (Hubbard being one of them). So that makes it $220ish from SCF to Hubbard by way of related part loans. And then a very generous $1/4b from Hubbard back to SCF. So in reality he might have stumped up with around $5m himself?

You need to add the assets and investments that SCF has bought off Hubbard & directors to the outstanding related party loans and advances. Example, $75m for dairy farms etc.

Numbers look like $400m plus out, $250m in. Net net, Hubbard has been using SCF as his piggy bank with the public's money to 'invest' in properties, companies etc.

Trying to spin a spider-web out of BS.

[Misc]

And Sam Kelt arrested again for violence
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10605828

How long beofre SCF disassociate themselves from this guy? Not a good look.

M

[winner69]

And Sam Kelt arrested again for violence
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10605828

How long beofre SCF disassociate themselves from this guy? Not a good look.

M

Sam doesn't like boyracers does he .... last time they had a disagreement they beat him up .... this time he kciked their cars .... think he would learn eh

And that small matter in a restaurant after a day on the proverbial (not Sam but his mates) wasn't a good look either

Sam prob pissed off with them because they called him a BANKER

[Misc]

Perhaps more charges to folllow?

- Wilful Damage
- Concealed Weapon (Parker Pen)
- Jay Walking
- Possesion of Misleading Debentures?
- Indecent Exposure (to property loans)
etc

LOL

M

[winner69]

Perhaps more charges to folllow?

- Wilful Damage
- Concealed Weapon (Parker Pen)
- Jay Walking
- Possesion of Misleading Debentures?
- Indecent Exposure (to property loans)
etc

LOL

M

Hey Misc .... you be impressed that Kerr and Torchlight have come to the need of SCF in their time of need ..... finding (or arranging) the $75m they needed to pay $50m back to the yanks

[Misc]

Indeed! Love to see the terms and security provided for the 'facility' .. Hubbards nuts were firmly 'in the vice' ,, and remain so imo

M

[minimoke]

More ducks lined up: Todays new has three new direstors:
" SCF chairman Allan Hubbard said the combined experience and skills of the new directors would make a significant contribution to the company.
"We are privileged to obtain the services of three outstanding directors. We recognise the desire across various stakeholders for South Canterbury Finance to enhance its governance arrangements with the appointment of additional independent directors. These appointments are a further step forward in the restructuring of South Canterbury Finance. Further announcements regarding the company's restructuring plans will be made when we are able to do so."
Baylis is chairman of Real Journeys, director of Port of Tauranga, Landcorp Farming (effective 1 November 2009), and a number of private companies. He is a former chairman of PGG Wrightson, Pyne Gould Guinness and Naylor Love Enterprises.
Baylis was a partner in the national firm of KPMG until 1992 when he established his own specialist practice. Company directorships now occupy the majority of his time.
McLauchlan is chairman of Scott Technology, deputy chairman of the Pharmaceutical Management Agency (Pharmac) and a director of a number of other companies including Scenic Circle Hotels, Dunedin Casinos, AD Instruments Pty and Aurora Energy.
His other appointments include pro-chancellor of the University of Otago and crown monitor to Southland District Health Board.
Shale is a practicing lawyer and has been a member of boards of listed companies for over 20 years. At present he is chairman of The Farmers' Trading Company, Jenkin Timber, Eastern Hi-Fi Group, the Japan New Zealand Business Council and Mercy Hospice Auckland Foundation.

He is a director of listed companies OceanaGold Corporation and Turners Auctions. He is also a director of Munich Reinsurance Company of Australasia and several other private companies."

[Alan3285]

Hi Enumerate,





Apologies for the late response:



No problem - I offer the same apology!





For the Trust Deed and all the formal filings ... go to the Companies Office site and look up South Canterbury Finance:

http://www.companies.govt.nz

This site is really interesting ... you can trace all the Trust Deeds and prospectus filings of any company. Just might have to load up the Trust or Limited Liability Company elements to track down the seat of an investments filing. Very useful site for the investment researcher's "bag of tricks".




I had a look on the site, but I can't work out how to find the details of the prefs (SCFHA) or indeed the bonds (SCF010 for example).

There are loads of documents there. I looked through the list of them, but nothing is 'obvious' to me as being what I need. The closest would seem to be 'Amendments to Trust Deed' but I downloaded one and they don't seem to talk about the terms of the prefs or the bonds (unless I totally missed it!)

Sorry to be a pain, but are you able to point to the relavent document more specifically?

Thanks,

Alan.

[Enumerate]

Sorry to be a pain, but are you able to point to the relavent document more specifically?


Use the following date reference ... I think this is the document you need ... the terms of the trust deed are on page 63, or so ...

Prospectus 15-NOV-2006 14:12:28 10052347892 Prospectus 3279.5 Kb

[Alan3285]

Hi Enumerate,




Use the following date reference ... I think this is the document you need ... the terms of the trust deed are on page 63, or so ...

Prospectus 15-NOV-2006 14:12:28 10052347892 Prospectus 3279.5 Kb




Perfect! Thank you so much for that.

To confirm for others who might follow:


The prefs (SCFHA) can have their dividend cancelled if the directors want to (page 64 of the document that Enumerate referenced above, clause 1.7b) for any reason they like basically;


The dividends, if cancelled, are not cumulative (same page, 1.9);


The ordinary shareholders cannot get a dividend ahead of the preference shareholders.


Hence the 'risk' is not insignificant, but the market would likely react very badly to such a decision.

Personally, I think that they have gone up to a very fair price (best price being offered if you want to buy today is 48c) with a current yield (at that price) of about 12% which is 50% more than you can get from SCF debentures, and should stay around there (in my humble opinion).


Alan.

[GTM 3442]

. . . lately.

I wonder why.

[Alan3285]

The HA's seem to have gotten quite popular. . . . . . lately.

I wonder why.




I don't think they have actually gotten 'popular' - they are still trading at a very substantial discount to their issue value (60% discount as of the time of posting based on last trade).

However, I do think that they have returned to a fairer value.

Back a couple of weeks ago when some people here were saying they were a bad investment, they were trading at 24% yield - that was way to high in my opinion.

Today they are trading at 14% yield which I think is around about right (12% to 18% I would say).

All that has happened is that people have recognised they were too cheap and that created demand.

Interestingly, as of right now, there are 305,000 'buys' on the board between 31c and 40c against only 65,000 'sells' between 42c and 48c, so there seems to be substantial support in depth for the current price with some potential upside still. I would say 49c is the upper end in the short to medium term, but speculators might push it over that for a brief period.

If you like a roller coaster and have the guts / timing to get out at the right point, you might be able to make 10% in a month, but I don't have the experience for that kind of trading ;-) and I wouldn't be advising it to anyone who doesn't know what they are doing!

Alan.

[temuk]

Quote:
Originally Posted by winner69
Auditors are Woodnorth Myers

Imagine the US investors asking 'Lachie - who are your auditors' and lachie says 'Woodnorth Myers - respected accountancy firm in Timaru with a branch in Ashburton'

Not being disrespectful to anyone ... but appearances are important.


posted by temuk 23-9-09
Used this firm when I was in busniess, the forementioned gets the big thumbs down
from me!!!!!!!




they must be reading this forum!!
temuk

[winner69]

Good move .... learning they need to be seen to be respectable and all that

[minimoke]

Well, Lachie Mcleod is off to pursue other intersts. Resigning at the end of the month to go farming. A compnay in difficulty with no CEO isn't goingh ot be great. Just how much of a burdon can Hubbard take on?

[Alan3285]

Well, Lachie Mcleod is off to pursue other intersts. Resigning at the end of the month to go farming. A compnay in difficulty with no CEO isn't goingh ot be great. Just how much of a burdon can Hubbard take on?




Yeah - not a good sign at all. You can just imagine them trying to hold onto him at least into the new year when they might do the Southbury float.

Makes me nervous.


Alan.

[sharer]

Well, Lachie Mcleod is off to pursue other intersts. Resigning at the end of the month to go farming. A compnay in difficulty with no CEO isn't goingh ot be great. Just how much of a burdon can Hubbard take on?

Verrrry interesting, for those of us with capital at (big) risk, where only recently it was touted as "very safe".
Hopefully a new competent CEO will emerge quickly, & have the guts both to start unravelling some of the more blatant conflicts of vested interests, and also to gently but firmly advise elderly gentlemen of the limits of their writ to play about with other people's money invested in good faith.

[Alan3285]

Verrrry interesting, for those of us with capital at (big) risk, where only recently it was touted as "very safe".

Hopefully a new competent CEO will emerge quickly, & have the guts both to start unravelling some of the more blatant conflicts of vested interests, and also to gently but firmly advise elderly gentlemen of the limits of their writ to play about with other people's money invested in good faith.




Hope it all turns out okay for you Sharer.

I've never had more than a few grand (always less than $10k for certain) in SCF so even if all went South (pun intended!) it wouldn't have caused me too many major problems - just been intensely annoying, but I do sympathise with those who are stuck in there big-time without many choices.


Alan.

[Dr_Who]

I really feel for the bond holders of SCF, as I do for all the other finance company investors.

I cant for the light of me wonder why you would want to pump in more money for these geezers. What is stopping these guys from using the funds as their own piggy bank in the future?

[Alan3285]

I really feel for the bond holders of SCF, as I do for all the other finance company investors.

I cant for the light of me wonder why you would want to pump in more money for these geezers. What is stopping these guys from using the funds as their own piggy bank in the future?




Personally, I would rather be a bond holder than a debenture / term depositor.

At least the bond holders can bail out anytime they want by selling on market - albeit perhaps with a loss of capital.

Those who have placed funds on deposit for a defined term are pretty much stuffed as I don't think many finance companies are letting funds out early at the moment.

I'd bet that many, if not most, of the debenture holders in Hanover would love to have (had) the option to bail out for a 25% loss by selling their 'investment' on market.

Alan.

[temuk]

I really feel for the bond holders of SCF, as I do for all the other finance company investors.

I cant for the light of me wonder why you would want to pump in more money for these geezers. What is stopping these guys from using the funds as their own piggy bank in the future?

I was there today and it's a pitty people making comments like this should have been!!!

you would have found out helicopters NZ had $30 million ( for 2 new chopters for a new contract in perth ) finance all signed up with GE but 4 days before needing it GE told them
fine us take us to court, we just havn't got the money.


what do you do WHO ????? Terminate the contract before it even starts!

His humour also shone in a very relaxed speech.
1 investor (a local doctor (a real one)) presented him with a person plate for his 40 year
old VW, it read SCFAAA.
With this Mr Hubbard said 1 investor from Fairlie vinage machinery museum wanted to buy
his car for the museum, he asked him 'how will I get around, I'm a bit old to walk".
but said he has changed his will to give it to them.


He also commented about mainly north island finance company's that have gone under,
"we don't build $30m houses, 1 even had big flash yacht-you don't see us having any yacht's in Timaru harbour.

There was no champane, not even wine. A few club samies and some ordervy things and orange juice.

Well worth 1 1/2 hours of my time.

If you want to know more just ask and don't rush to conclusions.

[COLIN]

While all the cynics and sceptics and scoffers are sounding forth, could I just meekly and politely mention that some of us are actually making money, hand over fist, on our exposure to SCF. I bought my last lot of the perpetual prefs at 38c on 14 July -they ended up at 57c today (some traded at 60c) giving me a capital gain of exactly 50%, plus dividend, in the space of 4 months. Now, how many of the said cynics, sceptics and scoffers have been able to better that, over the same time frame, elsewhere on the NZDX? I have also revelled in some super returns on the SCF010's, and am amazed that they are still selling on a yield of 19% - Alan Hubbard would have to lose every cent he has invested in SCF, and all the preferential shareholders would also have to lose every cent, before the debenture stock is at risk!

Temuk: I agree that its rather sad that so many seem to have little real knowledge of the situation here. For instance, Scales Corporation came out with a record profit result for their past year - probably greater than the majority of all the listed companies on the NZX Mid Caps; I will jump at the chance of taking up shares in the Southbury Group, with entities such as Scales included in the offering.

I can assure the cynics, sceptics and scoffers that I am not given to wild, irrational behaviour when it comes to my hard-earned investment dollars.

Yes, it might have been nice to have had a permanent replacement for McLeod all lined up before his departure takes effect, but I am sure that the appointment process is well under way and meantime Forsyth Barr will be the ones driving the capital raising and surrounding issues. In fact, they probably encouraged McLeod's early departure, given that the situation now requires a whole new set of skills.

Watch this space, and relax! I certainly am.

[Balance]

While all the cynics and sceptics and scoffers are sounding forth, could I just meekly and politely mention that some of us are actually making money, hand over fist, on our exposure to SCF. I bought my last lot of the perpetual prefs at 38c on 14 July -they ended up at 57c today (some traded at 60c) giving me a capital gain of exactly 50%, plus dividend, in the space of 4 months. Now, how many of the said cynics, sceptics and scoffers have been able to better that, over the same time frame, elsewhere on the NZDX? I have also revelled in some super returns on the SCF010's, and am amazed that they are still selling on a yield of 19% - Alan Hubbard would have to lose every cent he has invested in SCF, and all the preferential shareholders would also have to lose every cent, before the debenture stock is at risk!

Temuk: I agree that its rather sad that so many seem to have little real knowledge of the situation here. For instance, Scales Corporation came out with a record profit result for their past year - probably greater than the average of all the listed companies on the NZX Small Caps; I will jump at the chance of taking up shares in the Southbury Group, with entities such as Scales included in the offering.

I can assure the cynics, sceptics and scoffers that I am not given to wild, irrational behaviour when it comes to my hard-earned investment dollars.

Yes, it might have been nice to have had a permanent replacement for McLeod all lined up before his departure takes effect, but I am sure that the appointment process is well under way and meantime Forsyth Barr will be the ones driving the capital raising and surrounding issues. In fact, they probably encouraged McLeod's early departure, given that the situation now requires a whole new set of skills.

Watch this space, and relax! I certainly am.

Tell that to the thousands of SCF debenture holders who thought they could trust SCF with their money.

Instead of prudently managing their funds, SCF and Hubbard speculated with it, funded his own activities in the last year increasingly with it (recklessly and thought nobody would mind) and is now scrambling to keep SCF from going under.

Relax indeed.

[GTM 3442]

One of the visible exposures that SCF has to the market is the perpetuals. These have risen from 24c to 60c over the pats couple months.

I suspect that this reflects a view that SCF is now much less risky than it was. Essentially, that it's "coming right".

I also suspect that there's rather a lot of value inside SCF/Southbury/et al.

I further suspect that there may be some "South Islandedness" coming up - around PGC/SCH/Southbury/SFF/PGW/Marac. Not sure what, but it's been somewhat turbulent in that space lately - and turbulence often tends to lead to opportunity.

[COLIN]

Tell that to the thousands of SCF debenture holders who thought they could trust SCF with their money.

Instead of prudently managing their funds, SCF and Hubbard speculated with it, funded his own activities in the last year increasingly with it (recklessly and thought nobody would mind) and is now scrambling to keep SCF from going under.

Relax indeed.

And how many of these debenture holders have lost a single cent?

Lets keep our feet on the ground, shall we.

[COLIN]

One of the visible exposures that SCF has to the market is the perpetuals. These have risen from 24c to 60c over the pats couple months.

I suspect that this reflects a view that SCF is now much less risky than it was. Essentially, that it's "coming right".

I also suspect that there's rather a lot of value inside SCF/Southbury/et al.

I further suspect that there may be some "South Islandedness" coming up - around PGC/SCH/Southbury/SFF/PGW/Marac. Not sure what, but it's been somewhat turbulent in that space lately - and turbulence often tends to lead to opportunity.

A sensible voice.

[Balance]

And how many of these debenture holders have lost a single cent?

Lets keep our feet on the ground, shall we.

You could say the same thing about Hanover.

The final wash-up is when investors will find out what's in store.

There will be pain - of that one can be certain.

[temuk]

I would rather trust a man with wallet zipped tight and padlocked than hanover man
building $30m house!!!

[temuk]

Tell that to the thousands of SCF debenture holders who thought they could trust SCF with their money.

Instead of prudently managing their funds, SCF and Hubbard speculated with it, funded his own activities in the last year increasingly with it (recklessly and thought nobody would mind) and is now scrambling to keep SCF from going under.

Relax indeed.

Sounds like you wern't at the meeting either!

Read my earler post.

[minimoke]

Sounds like you wern't at the meeting either!

Read my earler post.
Temuk
It seems there is some confusion aorund the performance of Southbury and SCF. By all accounts Scales and Helicopters have performed (very) well. Its the performance of SCF which is the concern. I gather yesterday Hubbard says they have just made their biggest ever loss and also that Lachie is the one that led them into the property development loans - and so teh blame rest on his shouldres (actually it doesn't - some might but that kind of strategic direction falls to the Directors). Interesting also that Lachies 15m loan looks like it will be transferred into shares which he can then sell - haven't quite figured that one out yet.

[winner69]

According to this guy the $15m loan was the reason why lachie took risks

http://davidhillary.blogspot.com/2009/11/south-canterbury-finance-ceo-lachie.html

South Canterbury Finance CEO Lachie McLeod 'required to take risks that were not appropriate'

With the news yesterday that South Canterbury Finance CEO Lachie McLeod has resigned, today some comments are emerging about the reasons why he's leaving, but also some of the factors that contributed to SCF's agressive expansion strategy under his leadership that have lead to heavy losses and a change of strategy toward retrenchment today.

Chris Lee, a Kapiti Coast based financial adviser who had put client funds into SCF, is quoted as saying:


He said one of the company's worst mistakes in recent years was lending Mr McLeod $15 million to buy shares in the company.
"He's a good bloke and a good dairy farmer, but that loan meant the company was required to take risks that were not appropriate in the last few years."

As I have commented before, this loan is secured against shares in Southbury Group, and could go real bad real fast should Southbury be successful in raising capital, since it would be at a steep discount to the value of the shares used when the loan was made (and the situation appears no better if SCF and/or Southbury are not successful in recapitalising).

Chris Lee's comments, however, open up a new issue: the motivation for aggressive expansion during the last several years under Mr McLeod's leadership.Perhaps this serves as a warning for any financial institution with a history of rapid expansion: this strategy carries a high risk, and investors should be aware that even the best performing and best managed companies can get into trouble by expanding rapidly for long periods of time.

The expansion strategy has spent Mr Mcleod's strength (he was quoted as saying he had run out of petrol), but also South Canterbury Finance's, and Southbury's as well. It has probably spent Mr McLeod's personal finances as well, leaving him with a $15m debt backed by assets that have little value left.

[Dr_Who]

It just amazes me how naive the public was and is still.

What does it take to wake the public up to what is really happening behind the scenes?

Oh well, there is a reason why the mum and dads continue to loose money.

Good luck.

[minimoke]

It just amazes me how naive the public was and is still.

I'm not sure its naievity - I'd describe it more as "Faith". Finance companies just seem to keep going despite the warning signs. Like for example Lachie has "run out of petrol" - What has happened that has prevented regular top ups? and what is there in front of them that is going to need a full tank of gas?

[Balance]

I would rather trust a man with wallet zipped tight and padlocked than hanover man
building $30m house!!!

Doesn't matter whether you drown in 1 foot or 10 meters of water - drowning is drowning.

Hanover and SCF were both used as the private piggy banks of Mark, Eric and Alan - just look at all the related party transactions.

[Balance]

Sounds like you wern't at the meeting either!

Read my earler post.

Read your earlier post. Why did SCF buy shares in public listed companies? Operative word is "did".

No two ways about it - Hubbard saw SCF as his private piggy bank to do as he pleased.

The aftermath of such reckless behaviour is there for all to see - those who want to see, anyway.

[Balance]

I was there today and it's a pitty people making comments like this should have been!!!

you would have found out helicopters NZ had $30 million ( for 2 new chopters for a new contract in perth ) finance all signed up with GE but 4 days before needing it GE told them
fine us take us to court, we just havn't got the money.


what do you do WHO ????? Terminate the contract before it even starts!
.

If you want to know more just ask and don't rush to conclusions.

It's call force majeure. No court of law would rule for specific performance under such circumstances.

So Hubbard then thought it's okay to use SCF's public money to fund the helicopters.

Private piggy bank.

[temuk]

Temuk
It seems there is some confusion aorund the performance of Southbury and SCF. By all accounts Scales and Helicopters have performed (very) well. Its the performance of SCF which is the concern. I gather yesterday Hubbard says they have just made their biggest ever loss and also that Lachie is the one that led them into the property development loans - and so teh blame rest on his shouldres (actually it doesn't - some might but that kind of strategic direction falls to the Directors). Interesting also that Lachies 15m loan looks like it will be transferred into shares which he can then sell - haven't quite figured that one out yet.

The first part of your question is yes. and yes it is the biggest loss in scf's history ( only there 3rd). as for Lachie leading them into property development, can't comment-don't know.

the last part, I got told today it wasn't 15m (but close) but it was already into shares and if it wasn't for the kind hearted person Mr Hubbard is he would have nothing.

remember AJH and wife own 75% of southby, 12.5% in trust and the other 12.5% by other business associates ( I asume including lachies) .

[temuk]

It just amazes me how naive the public was and is still.

What does it take to wake the public up to what is really happening behind the scenes?

Oh well, there is a reason why the mum and dads continue to loose money.

Good luck.

Most people will never know what happens behind the scenes.


But the mum and dad have not lost anything here yet ( and I don't think they will).

[temuk]

Doesn't matter whether you drown in 1 foot or 10 meters of water - drowning is drowning.

Hanover and SCF were both used as the private piggy banks of Mark, Eric and Alan - just look at all the related party transactions.

It makes a difference when Mark related party loan is for a $30m house and a birthday
party in FIJI!!!

Alan's related party loans are for legit business deals ( when others commit, then say
sue us we just an't got the money on a friday @ 4.00 and the moneys needed on tuesday).

[temuk]

Read your earlier post. Why did SCF buy shares in public listed companies? Operative word is "did".

No two ways about it - Hubbard saw SCF as his private piggy bank to do as he pleased.

The aftermath of such reckless behaviour is there for all to see - those who want to see, anyway.

I think Mr Hubbard Brought shares in another finance co with his own money.(the same bank acc he drew on for SCF)
But I stand to be corrected.
I think he also dipped into NZOG ( wasn't that a good investment).

[temuk]

It's call force majeure. No court of law would rule for specific performance under such circumstances.

So Hubbard then thought it's okay to use SCF's public money to fund the helicopters.

Private piggy bank.

SCF's related party loans weren't used to 'prop up' but to 'expand' opperations, as explaned in a post the other day.

If you want to know facts give Lachie a ring, but make it fast!
I think he will shoot from the hip. ( I won't say why).
Work that 1 out if you want to show an 'INTEREST' balance.
no pun intended but i've got a whispher who you are.

[Dr_Who]

no pun intended but i've got a whispher who you are.

If you gonna make accusations like this you got to back it up. Come on spill it out, dont beat around the bush like a pansy.

Who is he?

[temuk]

I'll keep it under my hat at this stage Dr but
I have droped a hint in the message.

[GTM 3442]

Work that 1 out if you want to show an 'INTEREST' balance.
no pun intended but i've got a whispher who you are.

Seems somewhat poor form to "out" someone without stepping out of the closet yourself,

[Misc]

Agree! Temuk seems to be raking Te Muck!! Piss or get off the Pot sonny.

M

[westerly]

As a SCF invester and having observed this thread for sometime, I have wondered about the completely negative and often factually incorrect contributions of Balance and Misc.
And Temuk hasn't accused or outed anybody.
Westerly

[Dr_Who]

Can someone lend me $100m with no recourse?

If I make money on the $100m I get to keep it, but if the ventures I have invested in goes belly up, then I get to walk away... oh, I forgot, you will get an interested rate of 8% p/a.

Cheers mate, I will shout you a beer also.

[temuk]

Agree! Temuk seems to be raking Te Muck!! Piss or get off the Pot sonny.

M

people that are always negitive need an uppercut now and then, even if it is a
saturday night after a day at the races.

[GTM 3442]

I have put where I live ( which is more than you )
Not hard to work out that I am from Temuka.
I played seniors for Temuka from 1980 and played my last game in 2007.

it shouldn't be hard find me!

Even poorer form. . . . . .

Temuk - you make some pertinent points. Don't detract from them by playing silly "I know who you are" games with other posters.

Now, back to SCF, if you could be so kind . .

[temuk]

OK GTM you are right, have deleted my last post.

[westerly]

Can someone lend me $100m with no recourse?

If I make money on the $100m I get to keep it, but if the ventures I have invested in goes belly up, then I get to walk away... oh, I forgot, you will get an interested rate of 8% p/a.

Cheers mate, I will shout you a beer also.

Every bank has provided millions of dollars for losses on impaired loans. Every other loan providing institution has also allowed for the same. To say so called "mum and dad" investors were naive or stupid is a bit rich when professionals were collectively losing
billions of dollars.
N.Z. has poorly regulated financial markets and a generally inept financial press providing
the average investor with little protection from the incompetent or devious.
SCF has not yet failed to pay what is due and probably won't!

Westerly

[Alan3285]

Hi Westerly,




Every bank has provided millions of dollars for losses on impaired loans. Every other loan providing institution has also allowed for the same. To say so called "mum and dad" investors were naive or stupid is a bit rich when professionals were collectively losing billions of dollars.

N.Z. has poorly regulated financial markets and a generally inept financial press providing the average investor with little protection from the incompetent or devious.

SCF has not yet failed to pay what is due and probably won't!

Westerly




I realise that, to some extent, you are reacting to the extreme views that some are putting forward above regarding SCF.

If you scan back up, I have been reasonably confident that SCF will come through their difficulties.

However, having said that, I would not be so rash as to say that there is no risk of losing your money - at least for anything that isn't covered by the government guarantees (which is secured deposits maturing before Oct 2010 I believe).

If you are a bond holder or a preference share holder, then you are much more at risk. That's why, I believe, many bond holders are bailing out by selling on market (which they at least have the option to do whereas term depositers don't) for around 80c in the dollar. Better to get back 80% now.

I think I noted before that, I bet many Hanover creditors wish they could have sold out at 80% a few years ago. Probably many would not - it takes a very confident individual to admit they made a mistake and crystallise a loss - but at least the SCF bond holders still can for now.


Alan.

[GTM 3442]

In the (admittedly brief) time I held some SCF prefs, I read a copy of the annual report.

My recollection is of many more references to "provisions" and to "impairment" than I would normally feel comfortable with.

Having said that, I bought the prefs quite cheaply, on the basis "that the receivers will find more than 35c in the dollar should the time come."


Alan3285 bought "entirely for the yield which at that price was about 24% pa."


The bonds and the prefs are liquid, whereas other deposits are not. That makes a big difference.

The market has re-rated the SCFHA's from 24c to 60c, which seems to imply some degree of improved confidence.

I also note that the owners have been putting money in, rather than taking it out, as in some other companies.

Time will tell, and it will be interesting to see what SCF looks like in (say) 2 years time.

[Alan3285]

Hi GTM 3442,





In the (admittedly brief) time I held some SCF prefs, I read a copy of the annual report.

My recollection is of many more references to "provisions" and to "impairment" than I would normally feel comfortable with.

Having said that, I bought the prefs quite cheaply, on the basis "that the receivers will find more than 35c in the dollar should the time come."


Alan3285 bought "entirely for the yield which at that price was about 24% pa."


The bonds and the prefs are liquid, whereas other deposits are not. That makes a big difference.

The market has re-rated the SCFHA's from 24c to 60c, which seems to imply some degree of improved confidence.

I also note that the owners have been putting money in, rather than taking it out, as in some other companies.

Time will tell, and it will be interesting to see what SCF looks like in (say) 2 years time.




I didn't mean to say that I though SCF would actually fall over, just that there is (has to be) some risk of that (as with any business).

My point was that at least if you hold, say, bonds rather than term deposits, you have the choice of when to exit (albeit with a possible capital loss).

There have been many trades on market on the bonds recently, and that means that some people are getting out, and others are getting in - hopefully transferring whatever risk the market 'determines' is appropriate from those that can't or don't want to bear it to those that can / do.


I'd rather be a bond holder with the option of getting out at 80c than a term deposit holder with uncertainty and nowhere to go (not including those covered by the govt of course).


I think we are agreeing??

Alan.

[GTM 3442]

Hi GTM 3442,


I'd rather be a bond holder with the option of getting out at 80c than a term deposit holder with uncertainty and nowhere to go (not including those covered by the govt of course).


I think we are agreeing??

Alan.


Alan, I rather think we are.

I hope you made/make as much out of SCF, both short and long term, as I did/will.

Cheers.

[Alan3285]

Alan, I rather think we are.

I hope you made/make as much out of SCF, both short and long term, as I did/will.

Cheers.




Thanks GTM.


Alan.

[Alan3285]

Hi All,

It looks to me like an interesting situation has developed now (this is probably not news to those of you paying attention, but I am a bit slow):



The Preference Shares (SCFHA) have a 'last' trade price of 51c. This equate to a yield of approximately 11% (there were actually some trades at 57c a few days ago, which is a yield of approximately 9.84%).


The 2012 Bonds (SCF010) have a 'last' trade yield of 19.5%.


Now, can someone help me understand that??

Surely the bonds are safer than the prefs, since the prefs rank ahead of the ordinary shares only, whereas for the bond holders to lose some of their money, the prefs would already have to have been totally wiped out?

If that is correct, then how can it make any sense for the bonds to have a yield almost double that of the prefs?

Perhaps the market just hasn't caught up yet, and the bonds (SCF010) will follow the prefs up, thus reducing the yield?

Seems to me that bonds SCF010 is an excellent buy at that yield - just like the prefs SCFHA were a while back at 23c (24% yield)?


Or am I missing something completely obvious here (seems likely!)


Thanks,

Alan (with his finger poised on the 'buy now' button).

[COLIN]

Hi All,

It looks to me like an interesting situation has developed now (this is probably not news to those of you paying attention, but I am a bit slow):



The Preference Shares (SCFHA) have a 'last' trade price of 51c. This equate to a yield of approximately 11% (there were actually some trades at 57c a few days ago, which is a yield of approximately 9.84%).


The 2012 Bonds (SCF010) have a 'last' trade yield of 19.5%.


Now, can someone help me understand that??

Surely the bonds are safer than the prefs, since the prefs rank ahead of the ordinary shares only, whereas for the bond holders to lose some of their money, the prefs would already have to have been totally wiped out?

If that is correct, then how can it make any sense for the bonds to have a yield almost double that of the prefs?

Perhaps the market just hasn't caught up yet, and the bonds (SCF010) will follow the prefs up, thus reducing the yield?

Seems to me that bonds SCF010 is an excellent buy at that yield - just like the prefs SCFHA were a while back at 23c (24% yield)?


Or am I missing something completely obvious here (seems likely!)


Thanks,

Alan (with his finger poised on the 'buy now' button).

Alan: I covered this point in my post #387. The situation defies logic.
The yield on the prefs is adjustable, of course, on the reset dates, and will move up with the expected general firming of interest rates, but this still does not explain the huge distortion, given the relative rankings of these securities.

[Alan3285]

Hi Colin,




Alan: I covered this point in my post #387.



Apologies - I did actually read that post, but I did not really recognise the extent of the opportunity.





The situation defies logic.

The yield on the prefs is adjustable, of course, on the reset dates, and will move up with the expected general firming of interest rates, but this still does not explain the huge distortion, given the relative rankings of these securities.



My thinking exactly.

Yes - I agree that the prefs might see a higher yield on the next reset (1 Oct 2010 I believe), but you are still 'giving away' nearly 10% (roughly 20% minus 10%) of return in the meantime, so that cannot really explain it (at least in my opinion).

I am buying into the SCF010 bonds as they appear to be a bargain at current prices and I believe the chances of SCF defaulting on those is sufficiently low that the yield of 19.5% more than compensates for any risk and then some.


Alan.

[Misc]

Announced today. Along with seriously toxic company exposures over the last few weeks , and lack of go-forward annoncements , looking as sharp as a marble? M

[Steve]

So that makes it the CEO & CFO to resign in recent weeks? Possibly a result of the new independent directors tidying things up?

Could that suggest that there is some more bad news to come out before things start to improve at SCF?

[Alan3285]

Isn't the resignation of the CFO something that should be 'continuously disclosed'?

[Steve]

Isn't the resignation of the CFO something that should be 'continuously disclosed'?

What is stipulated under the listing rules as having to be continuously disclosed?

I will go investigate unless someone beats me to it...

[Steve]

What is stipulated under the listing rules as having to be continuously disclosed?

I will go investigate unless someone beats me to it...

From the listing rules:Continuous Disclosure

Examples of matters that may need to be disclosed

There can be no definitive list of all matters that may require disclosure. The best way for Issuers to ensure they comply with the Rules is to ensure that they have processes to continually review matters relevant to the
business and material changes in terms of the Rules.

While it would be a futile effort to attempt to list all possible matters that might give rise to requirements to disclose information under the Rules we have listed a number of matters that if they occurred are likely to
need consideration under the Rules, where material.
...
• Material senior staff changes.
...
In certain cases NZX will be prepared to work with Issuers to review information that should be released.
However we note that the obligations to disclose under the Rules remain with the Issuer. Any assistance from NZX should not be taken to constitute legal advice on the Issuer’s obligations.

[Alan3285]

Hi Steve,




From the listing rules:Continuous Disclosure

Examples of matters that may need to be disclosed

There can be no definitive list of all matters that may require disclosure. The best way for Issuers to ensure they comply with the Rules is to ensure that they have processes to continually review matters relevant to the
business and material changes in terms of the Rules.

While it would be a futile effort to attempt to list all possible matters that might give rise to requirements to disclose information under the Rules we have listed a number of matters that if they occurred are likely to
need consideration under the Rules, where material.
...
• Material senior staff changes.
...
In certain cases NZX will be prepared to work with Issuers to review information that should be released.
However we note that the obligations to disclose under the Rules remain with the Issuer. Any assistance from NZX should not be taken to constitute legal advice on the Issuer’s obligations.




Thanks for that - it certainly *seemed* like something price-sensitive to me.

Alan.

[Alan3285]

Hi All,

This just spotted on RNZ:

http://www.radionz.co.nz/news/stories/2009/12/22/1245da281e27




South Canterbury Finance (SCF) has sold its entire stake in Pyne Gould Corporation. The sale, at 50c a share, netted the company more than $14 million.

SCF had a 4.5% stake in in the rural services firm, or 29.5 million shares.

Chief executive Nigel Gormack says the sale, which made a small profit, is part of a programme to sell off assets not related to the company's main lending business.

He says the money raised will be used to shore up the balance sheet by providing extra liquidity.

South Canterbury Finance will carry out a capital-raising early next year, and is considering floating on the sharemarket.




Looks like they are serious about fixing things up for a float.

I'm getting into those 2012 bonds (SCF010) further - the yield is looking fantastic at more than 20%.

Still can't understand why anyone would hold onto the preference shares (SCFHA) though -the price is still ridiculously high giving a yield around 11%.


Alan.

[temuk]

Hi All,

This just spotted on RNZ:

http://www.radionz.co.nz/news/stories/2009/12/22/1245da281e27




Looks like they are serious about fixing things up for a float.

I'm getting into those 2012 bonds (SCF010) further - the yield is looking fantastic at more than 20%.

Still can't understand why anyone would hold onto the preference shares (SCFHA) though -the price is still ridiculously high giving a yield around 11%.


Alan.

Hi Alan.

what is the face value of SCF010?

can't seem to find it.

[GTM 3442]

Hi Temuk.


You could look under "Fixed Interest - NZDX Securities" on the Direct website


Face value is $1.00

Coupon rate is 10.43%
Maturity Date is 15/12/10012

Currently on offer at 18.5%

Pricing for 5000 at 18.5% as follows:


Principal $ 4096.51
Accrued Interest $ 23.18
Cost $ 4119.61

You get interest paid over the life of the bonds at 10.43% ($521.50 each year, $1564.50 in total)
At maturity, you get back $5000 of principal.

$5000 + $1564 = $6564.50 for an outlay of $4119.61 - better than 5% in the bank ?

Merry festive season. . . .

[temuk]

Cheers GTM much appricited

away fishing for 1 1/2 weeks--no phone, no power

absolut bliss!!

see every one next year.

[Steve]

This should be viewed as a positive move...

SCF appoints restructuring specialist (http://www.stuff.co.nz/business/industries/3198417/SCF-appoints-restructuring-specialist)
South Canterbury Finance has appointed corporate fix-it specialist Sandy Maier as chief executive to bring urgent change.

[COLIN]

This should be viewed as a positive move...

SCF appoints restructuring specialist (http://www.stuff.co.nz/business/industries/3198417/SCF-appoints-restructuring-specialist)
South Canterbury Finance has appointed corporate fix-it specialist Sandy Maier as chief executive to bring urgent change.

Agree. He will inject a lot more confidence - already reflected in the offer quote of 82 for the SCFHA's - a bit on the optimistic side at this stage, though, I must say!

[GTM 3442]

Agree. He will inject a lot more confidence - already reflected in the offer quote of 82 for the SCFHA's - a bit on the optimistic side at this stage, though, I must say!

Given that the IFT HA's are at 6500, I'd say it's very optimistic.

But while the quotes for SCF010 (2012 19%), SCF020 (2011 14.5%) and SCF030 (2010 7.85%) have firmed somewhat, they still show a fair degree of reliance on the Govt. guarantee.

[Misc]

The first thing he will likely do is suspend interest payments on the SCFHAs to protect cashflow. He may also get real tough on the related parties and make more accurate impairment provisioning. Obviously he has consulted to the Board in the last few months and agreed to a 1 year contract as 'hachet man' to try and save the sinking ship. This can only be done by firm and urgent action obviously. Be interesting 6 weeks or so. M

[GTM 3442]

The first thing he will likely do is suspend interest payments on the SCFHAs to protect cashflow.

Not sure Misc. I don't think that he/they can afford to do anything which even hints at default/moratorium, which is how a suspension of interest payments om the HA's would likely be seen.

[sharer]

...[SCF can't] .. afford to do anything which even hints at default/moratorium, which is how a suspension of interest payments om the HA's would likely be seen.

Agree with you GTM_3442.
SCF very fragile right now: anything that might look like losing credit ratings, failing new prospectus, more nasty debts not getting interest or capital repaid, market rumours, ill-health as might be expected for the elderly, a whole raft of vulnerabilities lurking to capsize the waka.
They just have to keep the ship steady while debt is quickly reduced, & business(es) pulled back to "right-size".
If they can succeed as they seem to be doing in very recent times, they might well find the SCFHA & related investors are the very people most likely to stump up more cash, if confidence returns.

[Misc]

An Urgent Restructure is required. You cannot 'gloss over' the fact of massive losses and severely impaired cashflow due to capitalised loans having been 'rolled'.

Sandy does not have the 'lncentive' of previous Management and Board to deny the facts.

This will get alot worse before it gets better ...imo

M

[GTM 3442]

True Misc., but the surest way to stop the money coming in is to stop the money going out.

Rather suspect we'll see asset sales, quarantine of impaired assets, that sort of carry-on.

Maybe Allied Farmers could be persuaded to stump up ?

[winner69]

This Sandy fella looks like he gets to the bottom of things pretty quick

Wouldn't want this sort of article to come out with the words South Canty replacing the word Radius would you .... but the story sort of has a familair feel to it

http://www.nbr.co.nz/article/sandy-maier-uncovers-awful-truth-radius-properties-116459

[Lawso]

Quarterly div on my HAs received today but at reduced rate of 5.61% p.a., previously 9.42%.
Interest on my sec. debs also received, steady 8%

[steve fleming]

This Sandy fella looks like he gets to the bottom of things pretty quick

Wouldn't want this sort of article to come out with the words South Canty replacing the word Radius would you .... but the story sort of has a familair feel to it

http://www.nbr.co.nz/article/sandy-maier-uncovers-awful-truth-radius-properties-116459

He was chairman of the Eric Watson backed failure Aquaria 21 a few years back.

Hopefully his business decision making has improved since then.

[Steve]

Included in the article is the comment that provision has been made for a larger finance company to fail under the Government Guarantee Scheme...

South Canterbury set for a shake-up (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10619191&pnum=0)
...
The eye-watering size of the provisions Treasury has set aside to cover potential losses under the guarantee suggests the Government expects future finance company failures will not be limited to the remaining small and mid-sized players. This again has had some market watchers eyeing South Canterbury with a degree of trepidation.
...

[Dr_Who]

He was chairman of the Eric Watson backed failure Aquaria 21 a few years back.

Hopefully his business decision making has improved since then.

Aquaria 21 was a total disaster!

How can you not make money with the only underwater world in Beijing with a population of 17 million?

[Alan3285]

Announcement Today (http://www.nzx.com/markets/NZDX/SCFHA/announcements/3289905/Investor-support-lifts-South-Canterbury-Finance):




Market Announcement Type:GENERAL

Investor support lifts South Canterbury Finance

3 February 2010

Market Update

Investor support lifts South Canterbury Finance

New South Canterbury Finance Limited Chief Executive Officer Sandy Maier has carried out a thorough review of the business and is confident the Company can meet current and future challenges.

The business of South Canterbury Finance is cash-flow positive and retains the confidence of its investors, financial intermediaries and its shareholder.

During January, historically a quiet month for the Company in terms of investor activity, South Canterbury Finance experienced an encouraging inflow of funds from investors. The Company has averaged in excess of $1.7 million of new investment money per day for January and its retention rate of existing investors lifted to more traditional levels.
South Canterbury Finance believes that this renewed confidence from its investors, and its large network of financial intermediaries, is due to a number of positive changes in recent months. These include, during December 2009, the successful capital raising by its parent company, Southbury Corporation Limited; the confirmation of the Company’s BB+/Negative outlook rating by Standard & Poor’s and its removal from CreditWatch Negative; and the appointment of Sandy Maier as Chief Executive Officer.
On 21 January 2010, South Canterbury Finance filed an application to participate in the Extended Crown Retail Deposit Guarantee scheme. The extended scheme commences on 12 October 2010, the expiry date of the current deposit guarantee scheme, and will provide eligible investors with a Crown guarantee on qualifying investments until 31 December 2011. If it is accepted into the extended scheme, South Canterbury Finance will be able to offer a greater range of investment options to investors.

South Canterbury Finance will announce its preliminary financial results for the six months to 31 December 2009 in coming weeks. It is now clear that further provisioning will be required in respect of assets previously identified as impaired. As well as fairly representing the Company's current view of the value of these assets, the further provisioning will ensure, as far as possible, that the Company’s results for future periods are not distorted. In addition, the early redemption of derivative instruments associated with the United States Private Placement facility and the impact of fair value adjustments on investments will have a negative impact on South Canterbury Finance’s results for the half year.

As part of the half year accounts preparation, it has come to the Company’s attention that adjustments may be required to the valuation and reporting of certain items in the 30 June 2009 audited financial statements. The Company also recently became aware that the valuation used at 30 June 2009 for its preference share investment in South Island Farm Holdings Limited (SIFHL) should have been recorded at fair value rather than cost, under the applicable financial reporting standard. An independent valuation of the SIFHL preference shares at the date of their acquisition is currently being undertaken. It is noted that any difference in value arising will be reversed in the current financial year as the preference shares have since been redeemed for their issue price. The Company is currently reviewing the extent of potential prior period adjustments and at this stage believes that they may not have a material impact on the current position of the Company.

All the matters referred to above are being worked through with the Company’s new auditors and further information will be provided once the Company’s preliminary results are available. As a result of the further impairments and adjustments the Company anticipates it will report a loss for the six months to 31 December 2009.

Chief Executive Sandy Maier says: “The results for the first six months of the year will not be representative of the historical achievements of the Company’s business nor of the strength of its future performance.”

In a further development, the investment bank Forsyth Barr has been mandated to source funding to strengthen the balance sheet of South Canterbury Finance. Further announcements in this regard will be made by the Company when it is in a position to do so.

Contact:
Sandy Maier
South Canterbury Finance – Chief Executive Officer
021 163 3806

[minimoke]

Announcement Today (http://www.nzx.com/markets/NZDX/SCFHA/announcements/3289905/Investor-support-lifts-South-Canterbury-Finance):
Wasn't there also news that SCF woudl return a loss for the six months to December.

How does a company run by an accountant get its valuation for SIFHL wrong?

[Alan3285]

Wasn't there also news that SCF woudl return a loss for the six months to December.




Err... did you read the announcement that you quoted from my post above?

To quote their original statement (extracted from the full one I posted above):




"... the Company anticipates it will report a loss for the six months to 31 December 2009."




The CEO is being pretty open about it.





How does a company run by an accountant get its valuation for SIFHL wrong?




Its nice to know that *someone* thinks accountants are infallible :o


More seriously though, it is not a good look, but I guess that's one of the reasons they gave up with the local South Island accounting firm, and went with the bigger guys.


Alan.

[minimoke]

Err... did you read the announcement that you quoted from my post above?

To quote their original statement (extracted from the full one I posted above):



The CEO is being pretty open about it.

Ah - yes - there it is down the bottom. I stand corrected.

[Alan3285]

The spin doctors couldn't resist making it hard to find!

:D

[minimoke]

More seriously though, it is not a good look, but I guess that's one of the reasons they gave up with the local South Island accounting firm, and went with the bigger guys.

"not a good look" - thats kinda generous isn't it? Look back over the past six months and what has that valuation done? Perhaps given investors greater confidence than if they had seen the accounts with correct valuation; given S&P more confidence with its rating; given the Govt with its Deposit Guarantee scheme. It took a while for previous accounts to come out - someone had a lot of time to make sure the accounts were "correct".

[Alan3285]

Hi Minimoke,


"not a good look" - thats kinda generous isn't it? Look back over the past six months and what has that valuation done? Perhaps given investors greater confidence than if they had seen the accounts with correct valuation; given S&P more confidence with its rating; given the Govt with its Deposit Guarantee scheme. It took a while for previous accounts to come out - someone had a lot of time to make sure the accounts were "correct".

Was the market valuation as at 30 Jun 2009 more or less than the historical cost they used in the financials as at that date?

Alan.

[minimoke]

Hi Minimoke,



Was the market valuation as at 30 Jun 2009 more or less than the historical cost they used in the financials as at that date?

Alan.
Isn't that a question better answered by the ongoing independent revaluation?

[Alan3285]

Hi Minimoke,




Isn't that a question better answered by the ongoing independent revaluation?





I don't understand. Aren't you saying that they overstated the figures in the balance sheet as at 30 Jun 2009 and thus 'misled' investors?





... given investors greater confidence than if they had seen the accounts with correct valuation; given S&P more confidence with its rating ...





If it gave investors and S&P 'greater confidence' then it must have been higher than it should have been, so you are saying that they overstated the value as at 30 Jun 2009?


Thanks,

Alan.

[minimoke]

Hi Minimoke,

Aren't you saying that they overstated the figures in the balance sheet as at 30 Jun 2009 and thus 'misled' investors?

I'm saying that thats perhaps a question best answered by the independant valuation.

I'll also say investors should have confidence in the accounts presented - especially when they took such a long time to finalise; especially when there are applicable accounting standards and when you are run by professionals and you use professionals they ought to know these standards and use them correctly; and especially in turbulent financial times.

[winner69]

and remember that one (main) reason for the delay in the accounts was that they were subject to 'peer review' ...... that sort of suggests that other experts looked at the accounts as well .... oh goodness gracious

What's an even bigger concern that there is to be further writedowns on impaired assets ... so obviously rose tinted glasses were on when they did the last assessment

NBR reported Maier is seeking funding 'with a degree of urgency' and with lack of clarity whether this funding is coming directly inot SCF or whether Southbury is doing the capital raising only causes more uncertainity

How much new capital does SCF need? that depends on the additional writeoffs .... but talk of $300m or more is going around


At least Maier getting things moving ... the big broom sweeping the floor clean might be painful though

[Alan3285]

I'm saying that thats perhaps a question best answered by the independant valuation.

I'll also say investors should have confidence in the accounts presented - especially when they took such a long time to finalise; especially when there are applicable accounting standards and when you are run by professionals and you use professionals they ought to know these standards and use them correctly; and especially in turbulent financial times.


So you're saying that you don't really know, and were just assuming that the accounts overstated the value as at 30 Jun 2009?


Alan.

[Alan3285]

Hi Winner69,




and remember that one (main) reason for the delay in the accounts was that they were subject to 'peer review' ...... that sort of suggests that other experts looked at the accounts as well .... oh goodness gracious

What's an even bigger concern that there is to be further writedowns on impaired assets ... so obviously rose tinted glasses were on when they did the last assessment

NBR reported Maier is seeking funding 'with a degree of urgency' and with lack of clarity whether this funding is coming directly inot SCF or whether Southbury is doing the capital raising only causes more uncertainity

How much new capital does SCF need? that depends on the additional writeoffs .... but talk of $300m or more is going around


At least Maier getting things moving ... the big broom sweeping the floor clean might be painful though





With respect to your point regarding whether the capital comes in directly to SCF or via Southbury which then subscribes for additional shares:

What would be the difference from the perspective of other investors in SCF (prefs, bonds, depositors etc)?

Does one option give greater security than the other? Which one would be more positive to pricing on the listed investments do you think?

Thanks,

Alan.

[minimoke]

So you're saying that you don't really know, and were just assuming that the accounts overstated the value as at 30 Jun 2009?
Alan.
When you bring people in to do retrospective independant valuations and it looks like extra provisioning needs to be done it strikes me that SCF doesn't know so what I know,or don't, is irrelevant.

[winner69]

When you bring people in to do retrospective independant valuations and it looks like extra provisioning needs to be done it strikes me that SCF doesn't know so what I know,or don't, is irrelevant.

right on mate .... cause it sounds like no one knows anyway ... what a mess

[Dr_Who]

right on mate .... cause it sounds like no one knows anyway ... what a mess

Are we surprise that it is in a mess?

A number of us have been putting up warning signs but few wanna listen.

[winner69]

Are we surprise that it is in a mess?

A number of us have been putting up warning signs but few wanna listen.


SCF accounts have always been a mish mash .... every year there has been adjsutments to prior years accounts - reclassifying stuff so nobody can track it through the years, things that don't always reconcile etc etc

Whats really amazing with the latest hoo hah about the valuation pref shares in SIFH is that the company was only formed in March land yet in June they can't work out a valuation. One would have hoped that the original tranasction was at some fair market value which became SCF cost but now it seems that this cost is not market value (after 3 months) ....... does this suggest that the deal in the first instance was not at fair market value then.

And i suspect that the new auditors were also involved in thsi peer review and it was not picked up .... not a good look

And i wonder what S&P are thinking now ... using the finally got out audited accounts to 'upgrade' their credit rating

I fear we will hear heaps more in this developing story

Shame the boys from The Viaduct keep picking on the poor southern country town boys isn't it

[winner69]

Hi Winner69,




With respect to your point regarding whether the capital comes in directly to SCF or via Southbury which then subscribes for additional shares:

What would be the difference from the perspective of other investors in SCF (prefs, bonds, depositors etc)?

Does one option give greater security than the other? Which one would be more positive to pricing on the listed investments do you think?

Thanks,

Alan.

Have no opinion on these points but prob better for existing investors if it the cash comes directly into SCF from an IPO

If it came in through Southbury no doubt there would be hooks attached to any deal and the new money might take preference over the old money

Not really thought about it so just a guess

[Alan3285]

Hi Winner69,





Have no opinion on these points but prob better for existing investors if it the cash comes directly into SCF from an IPO

If it came in through Southbury no doubt there would be hooks attached to any deal and the new money might take preference over the old money

Not really thought about it so just a guess





Do you mention 'hooks' because there were hooks for SCF itself in the $27.5m of additional equity shares that Southbury purchased recently?

I understood it was just pure equity (ordinary shares), but quite possible I missed something sneaky!

Alan.

[winner69]

Hi Winner69,





Do you mention 'hooks' because there were hooks for SCF itself in the $27.5m of additional equity shares that Southbury purchased recently?

I understood it was just pure equity (ordinary shares), but quite possible I missed something sneaky!

Alan.

Don't know Alan

With straight equity you would hope not

And prefs should still rank ahead of that new equity ... no problem

But with other 'capital' injections haven't prefs been shunted down the line a bit .... like isn't the recent $75m from Torchlight pretty high up on the pecking list of things turn to custard

Question for you Alan ... have you an idea how much new equity SCF needs?

[Alan3285]

Hi Winner69,




Don't know Alan

With straight equity you would hope not

And prefs should still rank ahead of that new equity ... no problem




Agreed - any new ords should create more confidence for every other investor. I think that is why the market looked on the $27.5m so favourably. It wasn't so much the quantum as the statement that Hubbard (Southbury specifically) was making:

If they thought that things were shaky, they might have lent $27.5m but they wouldn't have put it in as equity since under any default, they'd probably lose all of that on a marginal basis.





But with other 'capital' injections haven't prefs been shunted down the line a bit .... like isn't the recent $75m from Torchlight pretty high up on the pecking list of things turn to custard




I suppose I think of it that the $75m of cash from Torchlight added a buffer of that amount, but for anyone ranking behind it (SCFHA for example) it also added $75m in front of them, hence no net impact except that it reduced the chances of a short-term liquidity crisis.

If we assume that SCF continue to pay the 'dividend' on the prefs then no impact at all. The only other possible issue is that the interest rate on the Torchlight funds is higher than the rates at which SCF are re-lending it (on a marginal basis) and that reduced the profits from which the SCFHA dividend is paid.

However, my contrary thought on that is that a failure to pay ANY dividend or interest or indeed redemption would be seen so negatively in the market that they won't do that unless things are going South totally (no pun intended!)





Question for you Alan ... have you an idea how much new equity SCF needs?





No real idea myself.

In some respects, I don't think it necessarily needs any new equity.

A committed, long-term, line of credit from a substantial financier would do just as much for SCF in that it would create confidence in the market place and allow SCF to raise debenture funding at lower rates, thus increasing profitability, and eventually increasing the equity cover anyway.

The issue is that it is hard for them to get such a line of credit right now - one that is not able to be pulled in the short to medium term.

Absent that, then if I had to guess, I would say that raising $100m of new equity would be sufficient to have the same impact, and taking into account the fact that Hubbard has guaranteed any additional losses on the loan books subsequent to 30 Jun 2009:




In addition, a legal underwrite agreement with Allan Hubbard will stand as security for any further specific loans that could become impaired over the current recession period. (http://www.scf.co.nz/news-folder/allan-hubbard-boosts-support-for-south-canterbury-finance/)





Of course, the more they raised / put in to SCF, the better for other investors ;)


Alan.

[winner69]

Nothing like a good headline .... but seriously if they looking at vulture funds to take these loans of the book it will be costly

Reported equity in the the to be restated accounts was $225m .... lets say that when all the 'adjustments' are done it is $200m .... take a hit on the property loans ..... and **** a pretty distrssed balance sheet

Never mind .... they will be non cash transactions so they don't count

South Canterbury flogs property loans as more losses loom

http://www.stuff.co.nz/business/personal-finance/

[GTM 3442]

Seems as though the market has responded to the recent news by re-rating the SCFHA's from 50c in the dollar to 30c in the dollar.

[Alan3285]

Hi GTM,





Seems as though the market has responded to the recent news by re-rating the SCFHA's from 50c in the dollar to 30c in the dollar.





Cool - perhaps we could buy some for 30c when the market opens on Monday morning?

Actually, there's a chance for you to make a bit, perhaps you could source them for us at 31c and make 1c on each one?

How many are you offering to source for us at 31c?

Thanks!

Alan.

[GTM 3442]

Alan - wouldn't that be taxable ? (shudders)

The SCFHA's are the only SCF instrument which has the capability to reflect the market's opinion of SCF's prospects. So they're somewhat of a barometer.

Over past months - 24c was oversold, 60c was overpriced, 50c seemed reasonable, but there's been news since then, and we're back to 30c.

Where to next.

[Alan3285]

Alan - wouldn't that be taxable ? (shudders)

The SCFHA's are the only SCF instrument which has the capability to reflect the market's opinion of SCF's prospects. So they're somewhat of a barometer.

Over past months - 24c was oversold, 60c was overpriced, 50c seemed reasonable, but there's been news since then, and we're back to 30c.

Where to next.


This is the sharetrader forum isn't it? :rolleyes:


The point is that no-one is selling for 30c - the best you could get them for right now is 51c.

The last actual trade (and hence a market price with a buyer and seller), was also at 51c, so if you want to pick a number, that's the one.



Alan.

[GTM 3442]

This is the sharetrader forum isn't it? :rolleyes:


The point is that no-one is selling for 30c


Um, there's also nobody buying for 51c. . .

[Alan3285]

Um, there's also nobody buying for 51c. . .


Okay - perhaps I am wrong.

What does it mean that the last trade was at 51c then?

I understood that to mean that someone bought, and someone sold at that price, but clearly if no-one is buying at 51c it must mean something different?

Thanks,

Alan.

[minimoke]

Okay - perhaps I am wrong.


No, you're not wrong. It just means that the last time there was a willing buyer and a willing seller they could come to a deal at .51

Now that buyer has gone the next couple of people on the list reckons the value is .30. - perhaps they know something that the .51 buyer didn't know. But they aren't big spenders they only want 15,000 between them. The bigger spenders (3 of them) want 118,000 at .25 so perhaps that might be a better number to focus on.

As for sellers, there are a few there at .51 so perhaps they are right with their valuation and comfortable that whetever news is out there, or about to come out, gives them comfort to hold their position.

[minimoke]

..
Now that buyer has gone the next couple of people on the list reckons the value is .30.

And it looks like they were right - a couple of trades now through at this level.

[GTM 3442]

And the SCF010's have been re-rated from 19% to 35%. Mr Market really didn't like the recent news, did he.

[Alan3285]

Okay thanks - I thought for a while there that I was totally misunderstanding how the market worked!

Alan.

[Alan3285]

And the SCF010's have been re-rated from 19% to 35%. Mr Market really didn't like the recent news, did he.

I'm struggling with this though.

The last trade on the SCF010's that I can see, was at 19.5%.

It looks like there is a speculative buyer on there at 30%, but that's not the same as saying that they have been re-rated at 30% surely?

The most recent buyer and seller both agreed on 19.5% didn't they?

Alan.

[GTM 3442]

Hi Alan.

Yes they did. But that was before , and now there's nobody prepared to pay 19%.

[Alan3285]

Hi GTM,




Hi Alan.

Yes they did. But that was before , and now there's nobody prepared to pay 19%.






Forgive me if I am being a pain and am confused, but it *appears* that you are being very unbalanced in your analysis.

Each time you have chosen to quote the lower price that is posted as a buy price, but totally ignored the price that existing owners of the securities are offering them for sale.

Each time you say that the price is at the 'buy', but it is equally accurate, and just as unbalanced, to say that the price is at the 'sell' level.

Surely the only price that actually represents what two people have been willing to trade at is the 'last' price.


There are securities on the boards that have NO buy orders on at all.

Do you believe that those securities are truly worthless, just because there is no buy order on the board?


Just trying to understand the relavence of what you are posting.

Thanks again,

Alan.

[minimoke]

There are securities on the boards that have NO buy orders on at all.

Do you believe that those securities are truly worthless, just because there is no buy order on the board?

At that point in time they are. To have value there needs to be liquidity and if there are no buyers or sellers the owners are sitting on something that has no value.

Take for example FTX - the last sale price is still shown as 0.03 - but no buyers or sellers. By your reckoning existing shareholders still have 0.03 value in their shares. That I suspect would be wishful thinking.

Or take for example, in property, the christchurch Horror House. The RV would have shown a value, there were keen sellers but no-one wanted to buy. As it turned out there is no value in that property as it burnt to the ground - in fact it may even have negative "value" since debts are now owed for demolition costs.

Value will,of course, return when buyers and sellers come back together at an agreed price.

[Alan3285]

At that point in time they are. To have value there needs to be liquidity and if there are no buyers or sellers the owners are sitting on something that has no value.

Take for example FTX - the last sale price is still shown as 0.03 - but no buyers or sellers. By your reckoning existing shareholders still have 0.03 value in their shares. That I suspect would be wishful thinking.

Or take for example, in property, the christchurch Horror House. The RV would have shown a value, there were keen sellers but no-one wanted to buy. As it turned out there is no value in that property as it burnt to the ground - in fact it may even have negative "value" since debts are now owed for demolition costs.

Value will,of course, return when buyers and sellers come back together at an agreed price.


Okay - thanks for that. I just wanted to understand the level of reasoning behind your thinking.

Alan.

[Enumerate]

I think the Marac news has the fixed interest market in a flap:

Risk Manager goes walkabout -

http://www.stuff.co.nz/national/3300873/Missing-finance-man-found-in-park

$2.5m crack in the floorboards - just how robust are Marac's internal risk mgnt processes -

http://www.stuff.co.nz/business/3303685/Bad-loan-costs-Marac-2-5m

Fact of the matter is that South Canterbury have also demonstrated poor controls and poor judgment. I found the fact that they were delayed, for a number of critical weeks, in filing a prospectus acceptable to the Securities Commission to be deeply worrying. These people are stewards of billions of dollars - you would expect they could file an acceptable prospectus for raising debt in the New Zealand market!

There are better places to put your money.

[winner69]

I think the Marac news has the fixed interest market in a flap:

Risk Manager goes walkabout -

http://www.stuff.co.nz/national/3300873/Missing-finance-man-found-in-park

$2.5m crack in the floorboards - just how robust are Marac's internal risk mgnt processes -

http://www.stuff.co.nz/business/3303685/Bad-loan-costs-Marac-2-5m

Fact of the matter is that South Canterbury have also demonstrated poor controls and poor judgment. found the fact that they were delayed, for a number of critical weeks, in filing a prospectus acceptable to the Securities Commission to be deeply worrying. These people are stewards of billions of dollars - you would expect they could file an acceptable prospectus for raising debt in the New Zealand market!

There are better places to put your money.


..... and it seems that even some of the stuff used in that prospectus is to be restated .... not a good look at all

[Alan3285]

Marac is also refusing to say if the guy going 'walkabout' is related to the dodgy loan.

NZ Herald - 9 Feb 2010: Marac won't say if hidden loan linked to runaway (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10624981)

If it wasn't related wouldn't you have expect them to have issued a denial pretty quickly, or am I reading too much into it?

Alan.

[Enumerate]

If it wasn't related wouldn't you have expect them to have issued a denial pretty quickly, or am I reading too much into it?


In these times it does not take much for the market to add "one" plus "one" and arrive at the answer of -42!!

It is clear that the present day Marac is not the same as the Marac of old. However, the $2.5m loss is hardly life threatening. Of greater concern to the market is that risk assessment and management processes, in financial firms, are working to reasonable expectation. Any "bad press", in this regard, causes the entire sector to be punished!!

[Alan3285]

In these times it does not take much for the market to add "one" plus "one" and arrive at the answer of -42!!

It is clear that the present day Marac is not the same as the Marac of old. However, the $2.5m loss is hardly life threatening. Of greater concern to the market is that risk assessment and management processes, in financial firms, are working to reasonable expectation. Any "bad press", in this regard, causes the entire sector to be punished!!



Actually, you could take it as a very positive sign.

Whatever management are doing now, they have found the problem that was created years ago. Looks like they might be improving, so it should be taken as a positive sign really.

Alan.

[Enumerate]

Actually, you could take it as a very positive sign.
Whatever management are doing now, they have found the problem that was created years ago. Looks like they might be improving, so it should be taken as a positive sign really.


Alan, I wish I had your bright, sunny and optimistic, disposition.

Alas, I am cursed with a restless brooding - I keep thinking: "how many more difficulties will they find if they further improve their audit and control mechanisms".

I am haunted by an old geology phrase: "If you want to shoot elephants; look where elephants have been shot before".

I am plagued with the notion that a greater mess might be just under the surface, down Timaru way ...

My only comfort is that my hard earned $$ are well away from these deep dark pits.

[Alan3285]

Hi Enumerate,




Alan, I wish I had your bright, sunny and optimistic, disposition.

Alas, I am cursed with a restless brooding - I keep thinking: "how many more difficulties will they find if they further improve their audit and control mechanisms".

I am haunted by an old geology phrase: "If you want to shoot elephants; look where elephants have been shot before".

I am plagued with the notion that a greater mess might be just under the surface, down Timaru way ...

My only comfort is that my hard earned $$ are well away from these deep dark pits.





{Grin}

The deepest, darkest pits, are where all the juiciest pickings are! You just have to be rational and balanced in your choices, comparing returns to risks.


Alan.

[Enumerate]

The deepest, darkest pits, are where all the juiciest pickings are! You just have to be rational and balanced in your choices, comparing returns to risks.


Don't get me wrong ... I too have been spelunking many of these deep dark pits ... some of which I have decided to toss my money into.

As an example, I cite Bluestar Group (BLU020).

- Ask most investors and they think Eric Watson is involved ... absolutely wrong. (I agree that as a leading indicator for someone about to be shafted - the "Eric Watson presence on the register" is a pretty good predictor. However, his Bluestar group was a completely different animal).

- The Trust Deed is very good. The fact that the senior lenders have forced the halt of interest payments is commercial reality for a business of this type in a recession following on from the GFC liquidity issues. This is where I depart company from Chris Lee who has said there is some kind of obligation by the company to continue payments. The senior lenders are exercising their power - but the BLU020 holders are being compensated by an increase in the accruing interest margin.

- There are two factors that mitigate the risks, in my mind. 1) Printing businesses are usually "first out of the blocks" at the end of a recession; and 2) The ultimate, significant, owner of the business is the CHAMP hedge fund (funding management buy-outs, derivative of a large NY based fund) - hence as long as the business has prospects, there will be appropriate levels of equity in the business.

This is a view you will not get from your retail broker. There are significant risks - but even more significant rewards. I recommend BLU020 for your further analysis. (Of course, if you find anything untoward - I would appreciate hearing about it).

There are many other interesting deep dark pits ... I love the complexities of the various Macquarie funds - another point of difference I have with Chris Lee who tends to like much more traditional investments.

[percy]

Actually, you could take it as a very positive sign.

Whatever management are doing now, they have found the problem that was created years ago. Looks like they might be improving, so it should be taken as a positive sign really.

Alan.

As a PGC shareholder I think you have it right. It looks like Greenslade and new team have new controls now in place,which i take as a positive sign
The new people brought in and who now are in control are of a higher calibra than their predecessors.A lot of chickens have come home to rost in all finance companies.Those like Marac now have strong balance sheets,better management,tighter controls,so their future looks positive.

[Dr_Who]

As a PGC shareholder I think you have it right. It looks like Greenslade and new team have new controls now in place,which i take as a positive sign
The new people brought in and who now are in control are of a higher calibra than their predecessors.A lot of chickens have come home to rost in all finance companies.Those like Marac now have strong balance sheets,better management,tighter controls,so their future looks positive.


What controls are in place with regards to related party lending and promoters selling their asset into the company at inflated premiums?

[Alan3285]

What controls are in place with regards to related party lending and promoters selling their asset into the company at inflated premiums?


Hi Dr_Who,

Isn't that a question you should be addressing to Marac?

If you do, I'm sure there are at least some here who would be interested in their reply.

Thanks,

Alan.

[percy]

What controls are in place with regards to related party lending and promoters selling their asset into the company at inflated premiums?

Sorry I cannot answer that ,as I donot know.Should you mean the thames water Epic fund,I do not like it but think you have to look at george kerr"s excellent record of creating wealth.Better to have it in the tent rather than outside the tent ....... in!

[winner69]

..... and it seems that even some of the stuff used in that prospectus is to be restated .... not a good look at all

Amended prospectus filed - 27 changes made

And Alan you will be pleased ... the Chief Credit Officer has gone as well (not previously disclosed) so no more shonky loans eh


And apparently all those SIFHL pref shares have been redeemed and SCF has made an advance for the same amount to SIFHL ... work that one out but better to have loans than shareholdings in such companies i am told

So all on track now ... let the money conti ue to roll in ... announce the new capital structure and all will be honky dory

[Alan3285]

Hi Winner69,




Amended prospectus filed - 27 changes made

And Alan you will be pleased ... the Chief Credit Officer has gone as well (not previously disclosed) so no more shonky loans eh




Well, not entirely, as I still can't buy them for nothing despite what the sages in here have said... just a matter of time of course ....





And apparently all those SIFHL pref shares have been redeemed and SCF has made an advance for the same amount to SIFHL ... work that one out but better to have loans than shareholdings in such companies i am told




I guess you're right on that point, but it doesn't really change much at this point (no net cash changed hands I think?)





So all on track now ... let the money conti ue to roll in ... announce the new capital structure and all will be honky dory




I'd like to pick up some SCFHA at less than 30c again before it all comes right if possible.


Alan.

[GTM 3442]

Hi Winner69,

I'd like to pick up some SCFHA at less than 30c again before it all comes right if possible.

Alan.

You may be out of luck there Alan. A lot of the SCFHA's changed hands in the range 24c to 60c in the past few months.

I'd bet that there aren't a lot of those buyers who'd be looking to sell at a loss or reduced gain now - see the 33c bid & 50c offer range.

I'd suspect that any further sales at <40c will be forced by the seller's circumstances, and so will be correspondingly small, few, and far between.

[Alan3285]

Hi GTM,




You may be out of luck there Alan. A lot of the SCFHA's changed hands in the range 24c to 60c in the past few months.

I'd bet that there aren't a lot of those buyers who'd be looking to sell at a loss or reduced gain now - see the 33c bid & 50c offer range.

I'd suspect that any further sales at <40c will be forced by the seller's circumstances, and so will be correspondingly small, few, and far between.





Yeah - I'd have to reluctantly agree.

I picked up mine at a 24% return (or something like that) around Sep 2009 - more luck than judgement in getting the very top of the yield curve to be honest - they just looked like a great return compared to other risk / return options (like 3% in the bank!)


Maybe I should start trying to talk them down!

Alan.

[Balance]

http://www.stuff.co.nz/business/3319482/SCF-faces-redemptions-of-1-1b-in-2010

Clock is ticking.

[winner69]

http://www.stuff.co.nz/business/3319482/SCF-faces-redemptions-of-1-1b-in-2010

Clock is ticking.


Balance - they have $79m in the bank .... ha ha

[Enumerate]

Balance - they have $79m in the bank .... ha ha

Thats going to go a long way in covering $1.1billion in redemptions.

I would point out the SCFHA prefs have a terrible trust deed. Also, the margin you get above the cash rate in no way compensates for the real risk.

Do not buy these things expecting to maintain in income investment. They are perpetual - if push comes to shove, your capital will be propping up SCF, for a very long time, interest free (and, no, not even accruing interest - interest free as in "nada").