South Canterbury Finance Limited

[Dr_Who]

Enumerate. I think you have hit the nail in the head.

[Snapper]

Hi Snapper,



Wouldn't that depend entirely on your situation?

I'm no expert on tax, but if you pay tax on your trading gains (capital gains, not interest received), then wouldn't the loss be deductible too?


Alan.

Yes, you're right. Sorry, I was assuming that you weren't a trader.

Cheers

[Alan3285]

Interview of Sandy Maier by Bernard Hickey:

Interest.co.nz (http://www.interest.co.nz/ratesblog/index.php/2010/04/19/double-shot-interview-bernard-hickey-talks-to-south-canterbury-ceo-sandy-maier/comment-page-1/#comment-72224)

Personally, I would like to see the split into two or three that they are talking about. It makes sense, keeps the finance company going, and solves many of the problems, plus it (hopefully) allows us (taxpayers) to get out without a bath.

Alan.

[Contrarian]

Gidday

What a forthright, straight up, sort of guy.

[Enumerate]

Yes, I agree. A very impressive performance.

It seems SCF has enough capital to fund "the good bank". It seems "the bad bank" will simply be buried in George Kerr's back yard and the related party "equity investments" will float off and not require any capital at all.

I think Sandy will do his road show and will get most of the money he needs. Then interest rates will rise ... and SCF will be under very significant pressure. Whether he has the ideas, time and altitude required to restructure in time ... I think this external pressure could come on before the end of this year. Meanwhile, any of the internal pressures of bad loans, further defaults or other bad news ... could kill them instantly.

At least Maier is offering clear leadership. This is a significant, unimpaired, asset.

[minimoke]

Yes, I agree. A very impressive performance.

Yes agree it was a good performance - but really it wasn't a particulalry probing interview. A few soft questions with lengthy (but not rambling), nearl yWomans Weekly style answers.

The upshot being if you are an investor and want a governement guarantee then feel comfortable going to SCF (but don't be asking about where you're money is going). There are questions that need to be asked if you want an unguaranteed product but we weren't get the answers in that interview. He cleared up the "misunderstanding" around the BB rating and getting the guarantee (nice to know the tax payer is backing any old company on the basis of the rating at the time of application and not on any subsequent events). And the old war horse is in the office around 6.30am 7 dayas a week - which at 82 I can't help but feel a bit sad about.

[Alan3285]

Anyone care to explain why they think the SCFHAs are now rising so fast?

They were down to 22c (I think) last week, now there are bids to buy at 26c on the board.

I know I said above that I thought there would be support at or just below 20c, but I did not expect the irrational behaviour to actually increase the price.

Perhaps it is Sandy Maier's interviews and 'roadshow' - if so, just goes to prove my point about NZ investors. :p


No juicy opportunities for now at least....

Alan.

Alan.

[winner69]

Alan ... prob going up because 22 was so so so cheap

[Alan3285]

Alan ... prob going up because 22 was so so so cheap

Clearly the market consensus is so, even if I don't think so.

Trades now at 30c.

Ah well. Good luck to them!

Alan.

[Enumerate]

I have been trying to correlate what Chris Lee has to say in his most recent "Taking Stock" and Sandy Maier video prelude interview (on interest.co.nz) to the road show.

http://www.chrislee.co.nz/index.php?page=taking-stock

One key point Maier makes is that SCF will be partitioned into 3 - The "good bank", the "bad bank" and the "private equity" holdings. This structural emphasis seems to have escaped Chris Lee's notice. However, I would suggest this is a vital element of the proposed way ahead.

The "good bank" will be about a $1billion dollar entity - backed with capital appropriate to the new capital adequacy ratios.

The "bad bank" will be sold. Reading between the lines ... George Kerr's Torchlight is the most likely buyer. Presumably these negotiations are proceeding with establishing the price as the key next step (SCF have a view on the write-downs, clearly - Kerr will clearly be taking a more conservative view).

Southbury is being primed for partial float to allow the buyback of the "private equity" part of the SCF proposal.

Pardon me, but it seems as if Maier seems to be doing an excellent job. The structure makes sense. He is clearly shaping the best negotiation position possible, from what was a very weak position. He has the Southbury prospects to stiffen Kerr's keenness for the Torchlight purchase. He can have the impending Torchlight deal soften the desperation level, to the Southbury punters. He can point to the stable "good" finance company and the portfolio of "wet nosed" Hubbardite debenture holders to reduce the aura of desperation.

10 out of 10 for structure and negotiation position.

Maier has refused to put any dates on any of this. He has set NO time expectations. Very clever ... he can never be wrong ... none of the positive prospects can ever "go away" or lapse unless the counterparties make an explicit statement.

10 out of 10 for expectations management.

The continued government guarantee was the essential precondiction. The roadshow is all about influencing "thought leaders" in the investment community. This is the key to maintaining the debenture subscriptions/rollover rate. It is a selling exercise, pure and simple. Maier clearly recognises this.

10 out of 10 for the approach to securing confidence in the debenture market.

I get the sense that Chris Lee is very sniffy about Maier's achievements, to date. I don't understand this. Lee goes on and on about his "analysis" - but fundamental points of the restructure are ignored by him. Quite frankly, I cannot even follow his "analysis" on the rate of debenture rollover. There seems to be the dangerous implication in his "analysis" that no structural change is required at SCF and that things will unwind without any specific initiatives or effort?!? I find this casualness in codifying the key issues with SCF to be a serious shortcoming in Lee's "analysis". He also seemingly ignores the psychological factors which Maier, most certainly, does not.

I would love to see what Maier is doing in terms of capital planning. I fully expect that he is way too smart to even hint at what he has in his "gamebook".

Maybe Lee is a bit sniffy because Maier thinks SCF has a future independent of George Kerr or some of Lee's "grand unification" ideas. Fact of the matter is that Maier seems to be playing his hand with considerable flair and finesse. I would back Maier to pull this off - but we don't know the quality of the hand he has been dealt. Things still may be terminal.

Watch for three things:

1) the SCF debenture rollover and new subscription rate
2) the Torchlight deal for the "bad bank" assets
3) the Southbury float for the "private equity" assets

1) is a necessary condition for SCF survival - but should be reasonably secure. Either of 2) or 3) will be sufficient conditions for stability - but this is where the key risks remain.

[Alan3285]

Nice work Enumerate.

Another possibility is that they try to float off the 'bad' with the private equity. It woud be 'easier' in that it is just one 'deal', but harder in that the offering to the market is more complex.

I don't have an opinion on whether they would - just that it is possible.

Either way, the finance company is left, smaller, but properly capitalised, and with good loans in the market place.

I like it.

Maybe I'll have to pay a bit more to get back into SCFxx !

Alan.

[Enumerate]

I like the SCF010's at a 25% yield, the best.

You get a "partial" government guarantee - if the default event occurs before the end of 2011 (the debentures mature end of 2012).

The new prospectus debentures are 8%. SCF020, SCF030 debentures offer the same guarantee at about 9%.

SCFHA's are deeply subordinated, offer no guarantee and have a trust deed that has a number of potential "fishhooks" (suspending interest, perpetually, with no recourse, for example).

If SCF puts together the necessary and sufficient conditions to survive - this is not the end of the story. Interest rates will rise, this year. This will put pressure on SCF margins and on the default rate of it's existing loan portfolio. The SCFHA's are just too exposed, directly, to these pressures. Remember, the SCFHA's are either worth "nothing" or they are worth $1 - at $0.30 the market is saying there is a 30% chance of the most optimistic recovery scenarios for SCF. This may be a fair estimate (or indeed may even be pessimistic) - but at $0.30 per pref there are better "bets" elsewhere.

On the other side of the coin - buying up SCFHA's - large - should get you on Alan Hubbards Christmas card list.

[percy]

Enumerate.
Yes good work.Saving companies is all about having the right people there making it work.Maier is in control.Yes he can work with Kerr and others but getting the frame work right and getting time to work it through is all of his making.

[Alan3285]

I agree - if I was going back into SCF today it would be SCF010s.

Alan.

[Enumerate]

The contrast in how this organisation is working, since Maier became involved, is remarkable.

They were late with the new prospectus. It went to multiple revisions. The accounts were late, needed to be revised. They could not communicate a sense that they were executing a clear strategy. Their negotiation position was weak - in terms of assets they wanted to sell and money they needed raise - and they didn't articulate a plan.

Recently, the performance has seemed to turn around. They seems to be executing a clear strategy - they have the sales psychology right, in terms of the strengths they do have, they seem to be positioning themselves for the negotiation processes ahead.

They are still in the woods - but, they have a plan and a leader.

I do note recent senior staff departures and change of auditor. This actually greatly encourages me, because there must be some new blood brought in to correct very serious and basic process difficulties. I am not suggesting that these difficulties were due to the people departing - but sometimes organisation culture needs to change and otherwise good people get caught up in this transformation process.

Maybe there is hope for SCF?

[percy]

They are still in the woods - but, they have a plan and a leader.

I do note recent senior staff departures and change of auditor. This actually greatly encourages me, because there must be some new blood brought in to correct very serious and basic process difficulties. I am not suggesting that these difficulties were due to the people departing - but sometimes organisation culture needs to change and otherwise good people get caught up in this transformation process.

Maybe there is hope for SCF?[/QUOTE]

I think so.Timaru is a wealthy place.A lot of this wealth has been helped by SCF.there is a lot of goodwill.Hubbard did not walk.Instead he has put more of his wealth at risk to keep SCF afloat.
Because of this goodwill the right people are there with plans to keep it going.It is allways harder to work through trouble than an easy receivership.I spoke to Paul Preston one time.I asked him why he worked to save Smiths City.He told me he sorted out The Farmers after Chase Corp ran into troubles.
He said he saw the same customer,supplier goodwill with Smiths that he found was the key to saving the Farmers.Possibily Maier,Kerr and others see this with SCF.?

[Enumerate]

Because of this goodwill the right people are there with plans to keep it going. It is always harder to work through trouble than an easy receivership.I spoke to Paul Preston one time.I asked him why he worked to save Smiths City. He told me he sorted out The Farmers after Chase Corp ran into troubles. He said he saw the same customer,supplier goodwill with Smiths that he found was the key to saving the Farmers.
Possibly Maier, Kerr and others see this with SCF.?

I think the Smiths City example is an excellent reminder. There is a difference in the business ethos between North and South Islands (as there is between NZ and Australia). Relationships do matter more in the South Island - especially, as you point out, with the regard in which Hubbard is held.

Farmers was a good business, bled white by it's association with Chase (who stripped the property assets). Smiths City seriously over extended in it's expansion into the North Island. It was probably easier to save Farmers than Smiths, in business terms. However, the supplier and customer loyalties you mention - along with clear leadership - can have remarkable effects.

[winner69]

NBR says they even lent to Seripisos but won't say how much ... and did the ASB or SCF pay the outstanding rates bill for Terry

The more that comes out it seems that Alan had already sstrted doing his charity work a few years ago .... run out of cash just give Alan a ring and he will see you right

At least SCF got there money back from Rural before the trustee pulled the plug ... maybe more to be heard about this

[minimoke]

Looks like positive progress is being made. a third quarter profit of $4m. Cash position improving, George Kerr pumping more cash in,past-due loans being sold, non core assets being flogged off. Good news or spin?

[GTM 3442]

Good news or spin?

A bit of both I suspect.

[Alan3285]

They still need another $150m or so to keep their BB rating I think.

Progress, but whether it is quick enough is another matter.

However, they can't lose the govt guarantee just because they are dowgraded now as far as I know?

Alan.

[Marilyn Munroe]

The readers comments in this article on the NBR web site are particularly dour;

http://www.nbr.co.nz/article/torchlight-confirms-additional-scf-investment-123287

Boop boop de do

Marilyn

[Enumerate]

Excellent find, Marilyn.

"David Hillary" seems to have run the ruler over the most recent accounting numbers and suggests that SCF is in a perilous state. From at static point of view - I agree.

I think the key statement is in the post from "Red Dog The Pirate Guy":



Is sentiment strong enough for SCF to gain sufficient cashflow from investors to survive ?


In this situation it is dynamics rather than statics which are the guide to the future. If the cash is flowing in - SCF and Southbury have a future. If the cash is not flowing - bad news for all stakeholders.

Only Sandy Maier knows the truth - and he is not saying ... However he does seem to be playing his cards as effectively as he can to ensure positive "dynamics".

[westerly]

[QUOTE=Enumerate;305733]Excellent find, Marilyn.

"David Hillary" seems to have run the ruler over the most recent accounting numbers and suggests that SCF is in a perilous state. From at static point of view - I agree.

How credible is David Hillary? Looking at his blog he seems to have radical views and be
somewhat obsessed with SCF.

Westerly

[Alan3285]

Excellent find, Marilyn.

"David Hillary" seems to have run the ruler over the most recent accounting numbers and suggests that SCF is in a perilous state. From at static point of view - I agree.



How credible is David Hillary? Looking at his blog he seems to have radical views and be
somewhat obsessed with SCF.

Westerly


Yes - he is quite out there, and as Enumerate correctly points out, his analysis is very 'static'. It is written like someone who has recently taken Accounting 101 and is doing an assignment.

Probably the only issue that matters, is whether SCF can maintain cash flow. If they do, then they'll survive - if not, then they're gone. There is certainly an interesting academic debate around the valuation of the deferred tax asset (for example), but if it were written off tomorrow, it would not, in itself, make any difference. The only thing is whether most people would understand what it meant, and if the 'market' were to panic as a result, then SCF would likely tip over as few investors put or kept their money in, or if it triggered some arbitary switch elsewhere (such as at the trustee), and that forced them over the edge.

Alan.

[Enumerate]

Fact of the matter is that a finance company can actually trade profitably with negative shareholders funds! Of course, this is not a stable financial configuration - but it is viable for a period of time. Making profits on negative equity seems to be the dream of most "master of the universe" types at top of markets.

The Fonterra payout and prospect for increased payout, next year - should be encouraging medium term news. This will help both the direct finance side of the business (create quality demand and shore up the existing default rate) and the "private equity" component (increased profits from the farming support businesses).

I think Maier is keeping his focus on the "psychological" factors - the recent press releases do not really tell us anything but tend to shore up market sentiment to SCF.

I have not invested but think that the SCF010's are still the best bet to profit from the SCF recovery without buying undue risk. The SCFHA's might look cheap - but the BLU020's, in my view, are effectively just as cheap with better security.

There are still significant downside risks ... we are still awaiting the significant news that would clearly signal a turnaround (Southbury additional equity, sale of the "bad bank" portfolio, clear figures on the debenture subscriptions rate and the payback rate on the "good bank" loan portfolio).

[Alan3285]

Fact of the matter is that a finance company can actually trade profitably with negative shareholders funds! Of course, this is not a stable financial configuration - but it is viable for a period of time. Making profits on negative equity seems to be the dream of most "master of the universe" types at top of markets.


LOL! - Unfortunately, I think you are right!




The Fonterra payout and prospect for increased payout, next year - should be encouraging medium term news. This will help both the direct finance side of the business (create quality demand and shore up the existing default rate) and the "private equity" component (increased profits from the farming support businesses).

I think Maier is keeping his focus on the "psychological" factors - the recent press releases do not really tell us anything but tend to shore up market sentiment to SCF.

I have not invested but think that the SCF010's are still the best bet to profit from the SCF recovery without buying undue risk. The SCFHA's might look cheap - but the BLU020's, in my view, are effectively just as cheap with better security.



I completely agree - I am out of SCF at this point, and in BLU020 too.

I also think the ALF010s are a better bet. Whatever the value of the Hanover assets they took on turns out to be, that figure was added behind the ALF010s as security the day the deal was done, since the assets (whatever they may be worth) are there, and all the equity on the other side slots in behind the bonds. It would be better if it was $400m, but $100m is still good (for the bond holders). I'd be a bit peeved if I was a pre-existing shareholder in ALF though!





There are still significant downside risks ... we are still awaiting the significant news that would clearly signal a turnaround (Southbury additional equity, sale of the "bad bank" portfolio, clear figures on the debenture subscriptions rate and the payback rate on the "good bank" loan portfolio).

Agree.

Alan.

[winner69]

S&P credit analyst Derryl D'Silva said the finance company's credit rating was cut to B+ from BB because the "restoration of its financial profile has not been quick or sufficient enough .....


..... and Sandy a bit peeved in the announcement 'Commenting on the ratings action, Chief Executive Officer Sandy Maier says Standard & Poor's goes some way towards acknowledging the progress South Canterbury Finance has achieved but in the Company's view does not give full redit for the real progress made, particularly the recent momentum in building liquidity

Spose one needs to believe Sandy

Good idea finding a job for Alan .... President for Life .... stay away from the office but come along and have a cuppa at the board meetings old fella

[Lizard]

I'd be a bit peeved if I was a pre-existing shareholder in ALF though!


Do you think there was a realistic prospect of ALF surviving without the equity donation of Hanover investors (no matter how small it turned out to be)?

[percy]

Do you think there was a realistic prospect of ALF surviving without the equity donation of Hanover investors (no matter how small it turned out to be)?

No, not a chance in hell.They were belly up big time.

[Marilyn Munroe]

Standard and Poor's call it a downgrade.

Sandy Maier calls it an adjustment.

Could someone have a quiet word with Sandy and ask him to get his public relations drone to wind back the knobs on the spin machine.

Boop boop de do

Marilyn

"and adjusted the long term rating to B+" Source: Stock exchange anouncement.

[Alan3285]

Do you think there was a realistic prospect of ALF surviving without the equity donation of Hanover investors (no matter how small it turned out to be)?

The market didn't seem to think they were bust at the time.

If I recall correctly (unlikely!) then the ALF shares were around 15c before the deal, and the ALF010s were something like 25% yield.

Neither of those seems to imply that the cumulative opinion of everyone who had sufficient conviction to be involved was for them going bust at the time.

What has happened to the pre-existing ALF assets since the deal?

Alan.

[percy]

The market didn't seem to think they were bust at the time.

If I recall correctly (unlikely!) then the ALF shares were around 15c before the deal, and the ALF010s were something like 25% yield.

Neither of those seems to imply that the cumulative opinion of everyone who had sufficient conviction to be involved was for them going bust at the time.

What has happened to the pre-existing ALF assets since the deal?

Alan.

Negative shareholders funds. No way shareholders would have coughed up more dough.l

[Alan3285]

What has happened to the pre-existing ALF assets since the deal?



Negative shareholders funds. No way shareholders would have coughed up more dough.l

??

Alan.

[percy]

Alan,
Not sure if I misunderstand your post?The pre-existing ALF assets are still there with the liabilities,which far excede them.Chalkie in the Independant did a rather good article on ALF Hanover. pointed out that both were belly up.From memory ALF on their own had negative shareholder funds of minuse 10 or 20mil and if Hanover deal had not gone through they would have gone into receivership.I think he felt Hanover debenture holders would have been better off with a Hanover receivership,than letting ALF loose.As it turns out I think how very right he was and I feel sorry for Hanover debenture holders.

[Alan3285]

Alan,
Not sure if I misunderstand your post?The pre-existing ALF assets are still there with the liabilities,which far excede them.Chalkie in the Independant did a rather good article on ALF Hanover. pointed out that both were belly up.From memory ALF on their own had negative shareholder funds of minuse 10 or 20mil and if Hanover deal had not gone through they would have gone into receivership.I think he felt Hanover debenture holders would have been better off with a Hanover receivership,than letting ALF loose.As it turns out I think how very right he was and I feel sorry for Hanover debenture holders.

Me too!

Perhaps my failing memory has, well, failed?

What were the ALF shares trading at just before the Hanover deal?

I don't seem to recall the market thinking they were worthless, but I can't recall for sure.

Alan.

[Lizard]

It's unlikely you'd ever find a stock that trades for nothing...

In my view, anything that the ALF shares were trading at prior to Hanover reflected the hope of some form of recapitalisation. Unfortunately, the ALF debenture holders already had a govt guarantee and so wouldn't have settled for an equity swap... from my reading, ALF would not have survived the next earnings release without new equity. Just my view.

[Alan3285]

It's unlikely you'd ever find a stock that trades for nothing...

In my view, anything that the ALF shares were trading at prior to Hanover reflected the hope of some form of recapitalisation.



A hope that was realised with the Hanover deal!

In the event, ALF received (current estimates above) $120m of new capital.




Unfortunately, the ALF debenture holders already had a govt guarantee and so wouldn't have settled for an equity swap... from my reading, ALF would not have survived the next earnings release without new equity. Just my view.

Were the bond holders covered (ALF010)?

Are they covered now?

Alan.

[winner69]

It's unlikely you'd ever find a stock that trades for nothing...

In my view, anything that the ALF shares were trading at prior to Hanover reflected the hope of some form of recapitalisation. Unfortunately, the ALF debenture holders already had a govt guarantee and so wouldn't have settled for an equity swap... from my reading, ALF would not have survived the next earnings release without new equity. Just my view.

ALF was in pretty dire financial strife pre finalisation of hangover. They had a Resimac on standby to pump in $7m odd if needed but the Hangover deal raised enough 'capital' to put crucial convenants in order .... Resimac hasn't put in any cash and I think they have a few years to make their mind if they want to invest or not.

My reading is that ANF is or will be in more dire financial trouble than ALF ... and needs a huge amount of new capital later this year which ALF will have trouble doing ... if that is even a possibility

[winner69]

The guys or gals who make comments here have SCF in receivership the big govt bailout to start soon

So we all might be contibuting to the cause soon .... nice one

http://www.nbr.co.nz/article/scf-long-term-rating-cut-hubbard-moves-president-123853#comments

[Enumerate]

I have been pretty bearish on SCF ... I do not have any position in the company .... I have been vocal about my reasons why.

However, these NBR commenters are really way too bearish.

S&P downgrade their rating because of apparent lack of progress ... so what?

They can hardly be serious to suggest that S&P gave them a higher rating, at BB, than they deserved. This would impugn the integrity of S&P ratings, at all times ... why should you start believing them, now; if you accept this premise.

Hubbard resigning as Chair is only logical. He was Chair when his boys nearly sank the ship - SCF governance needs to vastly improve. What would precipitate this move - why some form of equity injection from a serious player.

I see the pieces coming together ... not blowing apart. I see a reasonable chance of survival - but not enough certainty to buy SCFHA's at about 30cents. Still think the SCF010's at 30% may be worthy of consideration, soon.

[Enumerate]

Another thing ... all the talk of a $400m equity injection is just rubbish. This will be a $750m - $1b loan book. You could easily finance this with $100m of tier 1.

Why do the private equity companies need any tier 1 capital? They will be sold when a new equity partner is found and "real" equity will take their place in the balance sheet.

If you accept that the impairments on the bad book have been fully accounted for ... all you need to do is to find a buyer for this book who will cover off the debt funding it ... then get on with the job of managing a better than estimated return from these loans. Maybe ALF is in the market for another batch of junk to shore up it's balance sheet - another "ninja recapitalisation" like the Hanover deal.

[westerly]

So we all might be contibuting to the cause soon .... nice one

[url]http://www.nbr.co.nz/article/scf-long-term-rating-cut-hubbard-moves-president-

Winner 69

For sometime I have thought there is a desire in some quarters for these South Island companies of long standing to get their comeuppance. PGC and PGW were both receiving similar predictions of their downfall not that long ago.
SCF will, I believe, survive given reasonable economic conditions.
As for S&P, how credible are their ratings? Rating agencies came in for some criticism following the latest financial crisis so one would expect them to be very cautious at the moment. Bit like a W.O.F.
doesn,t mean much if a wheel falls off.
Westerly

[minimoke]

Two things come to mind which doesn't lift my concern over SCF.

Firstly, whats with this "President For Life" - this sounds more like the kind of thing a Banana Republic lead by some despot would do.

Secondly - whose analysis should we rely on? On one hand we have Treasury who were, apparently, happy enough to let SCF into the Extended Guarantee Scheme based on SCF's BB (negative Watch) rating and presumably access to all the same information that S&P has. On the other hand S&P has had access to informaiton and decided to not hold the rating, nor drop them one nothch - they dropped them two notches to b+. What happened to the BB-? And this over just a few weeks!

If S&P are on the ball surely this means Treasury have been either casual in their analysis or generous with the use of tax payer cash to provide potential props. If Treasury are on the ball then S&P ratings can't really be worth much. Which should it be?

Have we now got a Treasury using tax payer funds propping up finance companies?

[Alan3285]

Two things come to mind which doesn't lift my concern over SCF.

Firstly, whats with this "President For Life" - this sounds more like the kind of thing a Banana Republic lead by some despot would do.

Secondly - whose analysis should we rely on? On one hand we have Treasury who were, apparently, happy enough to let SCF into the Extended Guarantee Scheme based on SCF's BB (negative Watch) rating and presumably access to all the same information that S&P has. On the other hand S&P has had access to informaiton and decided to not hold the rating, nor drop them one nothch - they dropped them two notches to b+. What happened to the BB-? And this over just a few weeks!

If S&P are on the ball surely this means Treasury have been either casual in their analysis or generous with the use of tax payer cash to provide potential props. If Treasury are on the ball then S&P ratings can't really be worth much. Which should it be?

Have we now got a Treasury using tax payer funds propping up finance companies?

Firstly, "I don't know" is the answer to your question.

However, something else to consider:

If the guarantor was private sector (rather than the govt), and they were staring down the barrel of a gun at having to tip in $800m (?) come 12 Oct 2010, or alternatively they could extend the guarantee and push out the day of reckoning with some increased hope (not getting into how much more) that SCF would dig itself out of the hole, would that private sector guarantor have extended the guarantee?

Pure conjecture of course, but I think they might just have done exactly what the govt did, and if so, then perhaps treasury did the right thing by the taxpayer?

Now, we can argue that they should not have given the guarantee in the first place of course, but that's all moot at this point in the specific context of SCF in 2010.

Alan.

[Lizard]

Have we now got a Treasury using tax payer funds propping up finance companies?

I'd have thought the answer was "No" - since the Treasury doesn't actually have to dish out the tax payer funds unless the finance company remains no longer propped...

[minimoke]

I'd have thought the answer was "No" - since the Treasury doesn't actually have to dish out the tax payer funds unless the finance company remains no longer propped...
On reflection the answer is "yes". Would I give money to SCF without the $849m Treasury provision - no I wouldn't. If SCF does have the Extrended Guarantee would I? Yes (actaully I still won't) and without having to do any work. Why - because I know I'm going to get my money one way or another; either from SCF or the tax payer.

Now I understand the Govt set up the Guarantee to give Finance Cos a bit of breathing space and depositers some confidence during the GFC. But why should Tax payers prop up SCF when teh writing on the wall isn't that flash. Sure a guarantee to 2010 should probably remain - but to 2011 when S&P reckon SCF aren't doing enough fast enough?

[Alan3285]

Personally, I think the whole problem is that the original scheme was set up wrong. Easy to say with hindsight perhaps.

If we assume for the sake of argument that the scheme was necessary (I don't believe in them, but let's assume that), then it *should* have been setup with an automatic reducing effect in terms of the guarantee.

Something like:

Deposits made in Nov 2008 to Mar 2009 = 100% until 12 Oct 2010
Deposits made in Apr 2009 to Jun 2009 = 80% until 12 Jan 2011
Deposits made in Jul 2009 to Sep 2009 = 60% until 12 Apr 2011
Deposits made in Oct 2009 to Dec 2009 = 40% until 12 Jul 2011
Deposits made in Jan 2010 to Mar 2010 = 20% until 12 Oct 2011
Deposits made on or after 1 Apr 2010 = No guarantee

Fiddle with the variables, but that would have mitigated the massive wave of redemptions that have built up in early Oct 2010.

It would also have allowed people who saw their guarantee running out (on, say, 12 Oct 2010) to get out earlier (in agreement with the deposit taker) and re-deposit to a later date (good for the deposit taker's liquidity profile) and with a lesser but longer guarantee.

As I say, easy with hindsight, and perhaps 10 minutes of thought...

Alan.

[minimoke]

Something like:

Deposits made in Nov 2008 to Mar 2009 = 100% until 12 Oct 2010
Deposits made in Apr 2009 to Jun 2009 = 80% until 12 Jan 2011
Deposits made in Jul 2009 to Sep 2009 = 60% until 12 Apr 2011
Deposits made in Oct 2009 to Dec 2009 = 40% until 12 Jul 2011
Deposits made in Jan 2010 to Mar 2010 = 20% until 12 Oct 2011
Deposits made on or after 1 Apr 2010 = No guarantee

I'm inclined to agree.
The difficulty I have with the EDGS now is that people like SCF can offer "loyalty boneses" on top of 8% to attract depositers knowing that the tax payer will be there to bail them out if need be. Depositers are attracted by the Guarantee - not by the Insitutions underlying offering.

SCF also has no incentive, in terms of the Guarantee, now to improve its credit rating. When it entered it was going to pay the max 150 points in fees. The government appears not to have thought about lowered Ratings post exteded scheme entry so now we have a B+ company paying the same fees as a more solid junk bond institution on BB. Surely a B+ would be worth another 50 - 100 points in fees?

[Alan3285]

I'm inclined to agree.
The difficulty I have with the EDGS now is that people like SCF can offer "loyalty boneses" on top of 8% to attract depositers knowing that the tax payer will be there to bail them out if need be. Depositers are attracted by the Guarantee - not by the Insitutions underlying offering.

SCF also has no incentive, in terms of the Guarantee, now to improve its credit rating. When it entered it was going to pay the max 150 points in fees. The government appears not to have thought about lowered Ratings post exteded scheme entry so now we have a B+ company paying the same fees as a more solid junk bond institution on BB. Surely a B+ would be worth another 50 - 100 points in fees?

Good points all.

However, it would provide an unfortunate positive feedback and potentially guarantee (!) that a failing institution was pushed under, since they couldn't get out of the scheme (for existing guarantees), and would be forced to pay the higher fees, making them less profitable, and less credit worthy, and lower rating, and higher fees, and .......


Alan.

[Enumerate]

Interesting development with a potential "Heartland Bank":

http://www.nzherald.co.nz/financial-services/news/article.cfm?c_id=43&objectid=10648881

[minimoke]

Interesting development with a potential "Heartland Bank":

http://www.nzherald.co.nz/financial-services/news/article.cfm?c_id=43&objectid=10648881

Though interstingly, they won't be SCF's White Night: "Asked if there had been any suggestion of including South Canterbury Finance in the tie-up Inch said "not at all." "No, they have to sort themselves out," said Inch."

[Dubdee]

To my knowledge the ratings agency does not count the value of the gurantee in its ratings. This is because the guarantee is limited in its application, being for "mum & pop" holders only. As far as retail is concerned unless you hold more that $250,000 of bonds which mature before Dec 2011 the bonds should be considered "AAA" because that is the rating of the NZ government Guarantee in NZ currency.

I think the reason is that the guarantee was extended is that the crown could have the keys now or better later, the more time the private sector has to work out a solution the better (maier has until then to work out a capitalisation structure), more time to get value from distressed assets and a bit of "too big to bail/fail"

[winner69]

one old geeza I knew once said never put your money into a finance company that advertises on TV .... and another old sage once said if a finance company has meetings to tell investors whats going on you can kiss your money goodbye (was before the government stupidly guaranteed such investments)

So SCF having investor briefings

But you have to have to find the time to read the comments here ..... insightful ... probably
http://www.nbr.co.nz/article/investors-invited-grill-south-canterbury-finance-124288

The Clark guy with two comments posted has for a long time been a devout supporter of SCF ... quickly responding to any who deride Hubbard or SCF .... how his tune has changed .... somebody has pointed out to him what is really going on

And too think that one day my hard earned tax payer dollars are probably to ensure the good old mums and dads get their money back

[Enumerate]

The NBR commentators are certainly very bearish on SCF. However, it is too early to start assessing the SCF books as if it were to cease trading. The NBR dudes must all be insolvency practitioners ...

We are still waiting for the signs that cash is flowing into SCF, which will save it ...



Watch for three things:

1) the SCF debenture rollover and new subscription rate
2) the Torchlight deal for the "bad bank" assets
3) the Southbury float for the "private equity" assets


We have had some positive rumblings on 1) and 2) ... but nothing definite.

Hence, it is too early to prepare the lapidary inscription for the SCF tombstone. It is also too early to commit capital to the high yield, speculative, SCF financial instruments.

[minimoke]

So SCF having investor briefings


We only have to think back a couple of months to the last "investor Briefing". There was Hotchin rambling around NZ and the punters lapped it up. Where was ALF prior to those meetings and whats its SP now?

[Enumerate]

We only have to think back a couple of months to the last "investor Briefing". There was Hotchin rambling around NZ and the punters lapped it up. Where was ALF prior to those meetings and whats its SP now?


An investor briefing for a scheme of arrangement is a completely different thing to the SCF investor briefing - which is about an inflow of capital.

While it is tragic that many people have had too bullish a view on the NZ finance sector; it will also lead to tragedy if people have too bearish as view. Fortunately, the market in exposed instruments (SCFHA and SCF010) seems to reflect a balanced sentiment. I'd begin to get interested in SCFHA at about 10cents; SCF010 at about 50cents on the dollar. Market prices are much better than this. It is this market sentiment that leads me to believe that the secured debenture rollover/issue is probably doing well.

Also, there seems to be some good news on items 2) and 3) of the "three signs":

http://www.stuff.co.nz/business/industries/banking-finance/3789072/Hubbard-hunts-for-new-company-shareholder

This is a volatile situation ... market pricing will reflect a number of psychological factors as investors try and make sense (and cents) of the situation. I think maintaining a careful watch for developments (positive or negative) could lead to appropriate timing for entry to the high risk/high reward SCF instruments.

[minimoke]

Also, there seems to be some good news on items 2) and 3) of the "three signs":

http://www.stuff.co.nz/business/industries/banking-finance/3789072/Hubbard-hunts-for-new-company-shareholder

I'm not sure this Press release says much.
- Hubbard MAY find a new partner/shareholder by the end of August
- The Trust Deed breach MAY be fixed by 31 August
- There MAY be 5 intrerested buyers - but the price MAY not be right.
- Torchlight MAY have loaned up to $112.5m but sems to have settled on $100m
- The $100m MAY get approval from Treasury, SCF/Torchlight Boards, and Trustee because it is more debt, not equity.
- SCF may accept bids from other parties - but not if they are too low.
- Meetings in Timaru, Wellington, Ashburton (?) and Auckland MAY go ahead but they aren't finailsed.
- Investors MAY get to meet new Directors.
- Timaru investors MAY get to meet Hubbard.

[Enumerate]

I'm not sure this Press release says much.


Exactly, hence the word "seems".

However, there are clearly developments in advancing towards full resolution of 2) and 3). A "portfolio" of significant capital inflow opportunities is better than nothing.

SCF clearly has a viable plan for reconstruction. Further, they are clearly focused on the execution of this plan. Whether they succeed, or not, depends on the capital inflows "measured" by the "3 signs".

About 6 months ago they did not appear to have a viable plan. Execution of recovery seemed to be more about denial and fumbling about than any rational course of action. Things have changed at SCF, for the better. This much, I think we can all agree on.

The issue as to whether these changes are enough to keep SCF "away from the light" is still open. If you read the NBR commentators - SCF has "gone over to the other side". What these people do not understand is that a historical balance sheet can tell you about risk - but it cannot predict the future. SCF could actually trade with "effective" negative equity - this is a point I made earlier.

Cashflow, and only cashflow, can be used to predict the final outcome for SCF. Maier is a smart operator - he is dangling hints - but he would be a fool make this information public, even if it were unambiguously positive. If he can project a positive and confident "vibe" - the SCF reputation will do the rest - in terms of promoting cash inflows. Offering specific targets or timescales would carry high risk in terms of destruction of the "psychology" due to delays or variations.

As an investor - I want to see a complete "case" of evidence to invest. If I wanted 8% - the government guarantee gives me AAA confidence that I will see my capital back from SCF, for certain investment instruments. However, there is the possibility of taking more risk, in SCF, and making a much larger return. The "3 signs" are the basic elements of SCF recovery. At the moment the returns do not outweigh the risks. However, as investors, we should be trying to maintain an accurate view on the state of SCF - neither too bearish nor too bullish - but simply "accurate".

[minimoke]

As an investor - I want to see a complete "case" of evidence to invest. If I wanted 8% - the government guarantee gives me AAA confidence that I will see my capital back from SCF, for certain investment instruments. However, there is the possibility of taking more risk, in SCF, and making a much larger return. The "3 signs" are the basic elements of SCF recovery. At the moment the returns do not outweigh the risks. However, as investors, we should be trying to maintain an accurate view on the state of SCF - neither too bearish nor too bullish - but simply "accurate".
Agree with all your points Enumerate. It would certainly be innappriate for Maier to give too much substance to "hints" - but this leaves him stuck a bit between a rock and a hard place. Like while he is drip feeding positive hints, facts keep coming out - like the new S&P downgrade and the drop in Torchlight funds. I'm not sure trotting out Hubbard is necessaily one way of geting your positive message across - maybe its time for a bit of re-imaging.

8% is not bad for "AAA" but its not just getting your money back at 8% that is important - these depositors are helping keep SCF afloat in the meantime so they also should be thinking are they getting sufficient compensation for this favour. The SCF investors I know are putting their money into SCF soley to keep them going - they are all agreed their money will not be there at the expiry of the Govt Guarantee. Its probably a bit rhetorical but could that money be put to more productive use if it went to other Institutions? So its not necessarily cash flow which is the determining issue - it is cash flow after the Guarantee runs out.

There are of course other opportunites!

[winner69]

Shoeshine in this weeks NBR column started of with the tale of Lehman Bros whose CEO was going on when Lehman was plummeting that perception was trumping reality .... when we all know that the reality was Lehman was in irreversible decline

However the article was about South Canty and he changed the perception and reality to a subheading Reality or deception?

Going on about how the magical equity injection from Torchlight that prob enabled SCF to get the extended govt guarantee has turned into debt and that Torchkight/PGC bow have $151m over SCF assets

Goes on and tries to explain all the different stories that are told over the deal

Spose Maier is the only one who has any idea and he is not always that upfront but some of the things SCF have done have been pretty desperate

Go to the nearest mag shop and buy a copy .... good aarticle

Also alludes to the Allied Farmers mystery $7m that has never surfaced even though it kept the bankers happy

[Enumerate]

If SCF get their capital inflows ... along the lines of the three likely methods we have talked about, before ... all the sins of the past will be forgiven.

If they don't ... well, the consequences are easy to predict.

I suppose the governments reasoning is that with SCF intact ... there is one large problem to be sorted. With SCF in the ditch ... there would be a myriad of problems to be sorted as insolvency practitioners run riot over heartland NZ business.

I am sure that everyone is aware that SCF is on the knife edge. Reminder of this fact, every now and again, is also useful.

What is not useful is journalistic schadenfreude. I think the suggestion that deception is involved oversteps the bounds of what is useful. Profiling Lehman Bros collapse and then following on with a SCF analysis asking a rather pointed question is a bridge too far, in my view.

If Chalkie wanted to do something useful ... they could give us some information on the capital inflows. That is the key to understanding the future of SCF.

[whirly]

SFO probes millionaire

BREAKING NEWS: Entities run by Canterbury millionaire Alan Hubbard are under investigation by the Serious Fraud Office as the Government moves today to try and protect $134m of investor cash.

http://www.stuff.co.nz/business/industries/3832664/SFO-probes-Canterbury-millionaire

[winner69]

NBR front page the other day had story about Alan putting his private stuff into the carities where he wanted his money to end up

[winner69]

Must be pretty distressing for the old bugger ..... not many individuals get put into statutory management

You would have to think affects SCF somehow

[whirly]

I sure it is distressing... I'd be interested in the contents of that NBR article but its subscriber content.

It also states in the article that "South Canterbury Finance, with which Hubbard was closely associated, was not part of the statutory management order"

[CJ]

I sure it is distressing... I'd be interested in the contents of that NBR article but its subscriber content.

It also states in the article that "South Canterbury Finance, with which Hubbard was closely associated, was not part of the statutory management order"But would you invest your money in them now?

[winner69]

certain irony on a wet day in Timaru that good old Alan who drives around in his old VW is now sort of tainted in the same way that Petrovich and Bryers have been but Hotchin in still squeaky clean

[Marilyn Munroe]

This is sad, really sad.

A man who strode the earth as a financial lion and who should have been basking in the glory of his past achievements in the twilight of his years is reduced to this.

Boop boop de do

Marilyn

[whirly]

Winner69 you must have been lucky I think cos its all still locked up for me.

[QOH]

No I can't get in either.
I do feel sorry for Allan Hubbard, and hope all this stress doesn't kill him. I still think he is an honourable man, maybe I'm naive but he does seem to have done his best to keep SCF going.
At least he hasn't skipped off to Hawaii.

[winner69]

This is sad, really sad.

A man who strode the earth as a financial lion and who should have been basking in the glory of his past achievements in the twilight of his years is reduced to this.

Boop boop de do

Marilyn

I admire the writings of John Kay in the Financial Times .... sadly what has happened to Alan is what has happened across the world .... all because of a failed new financial world

here's what Kay wrote last year



John returns to his experience as a Halifax director to retrace the rocky road to last week’s rescue takeover.

I once gave away more money than Andrew Carnegie or Bill Gates. Ten years ago, as a director of the Halifax Building Society I authorised the distribution of almost £20bn to its 8m members on flotation of the business. Last week, the story reached a sad denouement and much of the windfall slipped away. The organisation, now part of HBOS, agreed to a rescue bid from Lloyds TSB.

The business I joined gathered deposits from small savers, mostly through its branches. It lent the proceeds to house buyers. Founded as a self-help organisation by provident Yorkshire folk 150 years ago, the Halifax became the world’s largest mortgage lender. Its quality of service and competitive interest rates trounced conventional banks in the UK retail savings market. The simple business model was very robust. In the early 1990s, a combination of high interest rates, recession and falling house prices posed much more serious problems for UK homeowners than anything seen, or likely, in the current credit crunch. But the Halifax remained profitable and mortgages readily available.

Accepting deposits and underwriting and administering mortgages requires that millions of records should be maintained and updated every day with almost no errors. This activity does not require flair or imagination but does require conscientious individuals with integrity and loyalty. The Halifax was a precision machine that made the most of the talents of ordinary people. I came to understand the fundamental incompatibility of the cultures of retail and investment banking and why the marriage of the two so often leads to tears.

The road to nemesis began, not at conversion, but earlier – on the day it was decided that treasury should be a profit centre in its own right rather than an ancillary activity. Legal restrictions on UK mortgage lenders were relaxed in 1986. Halifax’s main rival, Abbey, converted to a public company and leveraged its deposit base to build a large balance sheet. Most bankers were incredulous that the Halifax had been so slow to take advantage of this opportunity.

For an economist who taught that profit could be sustained only as a result of competitive advantage, this diversification raised a simple question. Some businessmen on the board, accustomed to a world in which profit is earned only by meeting customer needs, saw the same difficulty. Trading in short-term money market instruments is essentially a zero-sum game – one party’s gain is another’s loss. So what was the source of the trading profits that not just our company, but every company in this business, claimed to make? The experienced bankers would shake their heads at this naivety. If they deigned to answer the question at all, it was to say that our traders were uniquely perceptive and prescient, although it was difficult to remain convinced of that once you had met them. Large banks derived an informational advantage from the volume of business they transacted for their main customers. But it was hard to understand why those customers tolerated it, or how newcomers could muscle in.

Most apparently successful trading strategies involve what I now call Taleb processes, after Nassim Taleb’s book The Black Swan. A series of small profits is punctuated by occasional large losses. Then cognitive dissonance combines with short memories. The profits are attributed to successful trading, the losses are the result of unforeseeable events.

There, in a nutshell, is the story of the credit crunch. And there is the story of how a business that had grown for 150 years forfeited its independence. When the dust settles, many banks and hedge funds will have lost more money on their trading activities in the past year or so than they had made in their entire history. Those conscientious people who process deposits and issue mortgages are still there, though many have had the worst weekend of their lives. The business they do continues to make money. Customers mostly remain loyal. The pursuit of shareholder value damaged both shareholder value and the business. We let them all down.

John Kay stepped down from the Halifax board in 2000.

[winner69]

Talkback already has Hubbard as the NZ version Madoff .... ...... shouldn't allow the lonely and uninformed ring up radio hosts .... but it keeps the ratings up

[Enumerate]

The psychology that offered SCF some kind of hope for the future has now been reversed. They might as well put SCF into statutory management, now.

If there is impropriety - the Registrar of Companies has no choice but to refer the matter to enforcement authorities. The fact this has been referred to the SFO for investigation is obviously a serious escalation.

I expect a rapid suspension of all tradeable SCF instruments on Monday.

Very sad.

[winner69]

hey Enumerate (love that name) - maybe Shoeshine knew something when he used that word that you thought was a bridge too far - it was journalistic schadenfreude (whatever that means) .

Could be a micro version of Lehmans collapse after all

Hard to see SCF not being embroiled in all this ... (pending) recap organised by the Dunedin sharebroking firm would need his signoff ... doubt whether he is allowed to sign anything for a while

Methinks Treasury have essentailly run SCF for a while now and as Alan was making sure his charities got their money that was the last straw for them

just as well we have a generous government ..... we all pay instead of a few losing the lot ... is that fair

[Enumerate]

We have gone from "Schadenfreude" to "Widerstehe doch der Sünde".

I was really hoping that it would not come to this. These latest revelations are a complete bombshell. I do not believe anyone was anticipating anything like this. This could end up as criminal charges against Hubbard. Hubbard's integrity was one of the psychological pillars of the SCF rebound.

[QOH]

I'm happy that at least the interest on debentures went though this week.

[Alan3285]

The psychology that offered SCF some kind of hope for the future has now been reversed. They might as well put SCF into statutory management, now.

If there is impropriety - the Registrar of Companies has no choice but to refer the matter to enforcement authorities. The fact this has been referred to the SFO for investigation is obviously a serious escalation.

I expect a rapid suspension of all tradeable SCF instruments on Monday.

Very sad.

Yes - I agree they should suspend, as it would not seem right to allow trading in the SCFHAs or SCF010s at least, and if they suspended those, then the SCF020s and SCF030s would have to be suspended too I think.

Not sure if they will though - AH is not directly involved in SCF now (theoretically), but he is, ultimately, the controlling shareholder.

Will be watching as an interested by-stander!

Alan.

[minimoke]

Stunned!. But once again we see the words "related party loans". While AH is now only President For Life he was part of the operational side of SCf while the problems with Aorangi Securities were occurring. Even now he says he's the one trying to get a SCF deal together with an interested overseas party. AH was known for his "hands on" approach but Aorangi have, allegedly, unsecured loans which are poorly documented so can any assumptions be made about SCF? This cannot be good for SCF. Like TEL, SCF's whole approach now is based on "trust us" but when you have AH under Statutory Management how far can that trust go. I guess we wait to see what ripples this particular boulder causes now its been biffed into the pond. What will be interesting is to see how closely SecCom and Treasury talk. If a compliant was made in February, then did this information get to treasury while they were looking at the Extended Deposit approval. Treasury were pretty fast in getting confirmation out to depositors that they remained covered and not affected by "todays actions" - bu tit looks like tax payers are one step closer to bailing depositors out.

[minimoke]

Hard to see SCF not being embroiled in all this ... (pending) recap organised by the Dunedin sharebroking firm would need his signoff ... doubt whether he is allowed to sign anything for a while

ForrBArrs Monday "Morning Report" does at least mention the Aorangi news in its small print.

[Anna Naum]

Statement from Mr Hubbard:

"I am writing to you following recent action by a Government department.
"I have operated Aorangi Security as a mortgage company for over 30 years and during that entire period interest has been paid quarterly and the clients have suffered no loss of capital and have a prompt return of capital.

"The current position of Aoarangi is approximately as follows:

"Mortgage and loans owing to Aoarangi: $126 million

"Cash at bank: $2 million.

"This adds to $128 million.

"Client desposits $88 million which means a surplus of $40 million.

"The $40 million surplus belongs to myself and family and all our equity has been subordinated to client interest, ie, the Hubbard family stands any loss before clients do.

"The Crown seems to believe that your capital is at risk under my management and have appointed a statutory manager whose job is to realise all the loans and repay you your capital. This will take time as it is not possible for borrowers to repay loans at short notice.

"There are sufficent funds on hand to pay interest due at June 30.

"If for any reason you do not receive your capital back in full and provided it is within my resources I will meet any shortfall.

"I extend my personal apology for what has happened.

"I am sorry that this action was taken by a government offical with little consultation with myself and can only conclude that the government official has been misguided in his action.

"In the past month I have been working on finding a solution to South Canterbury Finance affairs and hope to arrange an agreement with an overseas company, subject to confirmation by June 30 to inject a large amount of capital which would place South Canterbury Finance in a secure position for the future.

"As you will have read in the media in February last I introduced $150 million of assets into South Canterbury Finance to ensure that there was an equity for preference shareholders and that they suffered no loss.

"I don't believe in the history of New Zealand that any person has acted more honourably than myself." Allan Hubbard, June 2010.

[minimoke]

....
"The Crown seems to believe that your capital is at risk under my management .....

"I don't believe in the history of New Zealand that any person has acted more honourably than myself." Allan Hubbard, June 2010.
Oh dear - theres probably a clue there!

[Dr_Who]

There are skeletons in the closet not yet exposed. A number of posters on here have alerted us awhile back. Sad state of affairs.

[mouse]

Now, with coal you are either mining the stuff and selling it. Or it is staying in the mine. Is coal where people should, in the South Island, put their cash? Would it be safer than Finance Companies? Try Pike River?

[moimoi]

and now the real reason for announcing recently the "President for life" role at SCF becomes clearer.

[Balance]

So what is SCF after this?

It's an investment company - not unlike Equiticorp in the old days. It derives the bulk of its funding from investors - lends some out but invests in companies and lends to them as well??????????

Let's hope it does not become another Equiticorp.


What a tangled web ..... looking mofre like Equiticorp each passing day?

[minimoke]

I expect a rapid suspension of all tradeable SCF instruments on Monday.

Very sad.
First thing to go is SCF's prospectus - pulled today for a re-write

[Alan3285]

First thing to go is SCF's prospectus - pulled today for a re-write

I don't think they would have had much choice - any material change to the company's circumstances require the prospectus be re-written to cover that event, and I would think the ultimate controlling interest going into Stat Mgt is a material event.

Oddly, the impact on the SCFHAs hasn't been as significant as I thought it would be. I was hoping for another buying opportunity!

Alan.

[COLIN]

What a travesty. Alan Hubbard gets his good name besmirched, while real rogues like Hotchin and Watson go free.

The young lion - aka Kerr - is already circling, sensing that the old lion has lost his strength. And meanwhile the vultures and other carrion creatures - aka the great unwashed and uninformed - wheel above, depositing their dung.

Where were these "concerned" civil servants when Strategic and Hanover and Bridgecorp and Provincial and Capital/Merchant and MFS and Babcock & Brown, etc., etc., committed their various acts of public hurt? Nowhere to be seen!

What utter hypocrisy.

[Awamoa]

Couldnt agree more Colin.
This guy has done more for assisting getting people into business and helping various charities than probably any other NZer.
People like Balance who love to sit and bag him will never acheive a fraction of what AH has.
This is likely to be an opportunity for a few beauracrats whose jobs are threatened to justify keeping them for a while longer.
Its a pity they couldnt find the energy when it was really required.

[Balance]

Couldnt agree more Colin.
This guy has done more for assisting getting people into business and helping various charities than probably any other NZer.
People like Balance who love to sit and bag him will never acheive a fraction of what AH has.
This is likely to be an opportunity for a few beauracrats whose jobs are threatened to justify keeping them for a while longer.
Its a pity they couldnt find the energy when it was really required.

Wow! Such undying unadulterated faith in AH.

Bravo, let's hope you are right.

[Balance]

What a travesty. Alan Hubbard gets his good name besmirched, while real rogues like Hotchin and Watson go free.

The young lion - aka Kerr - is already circling, sensing that the old lion has lost his strength. And meanwhile the vultures and other carrion creatures - aka the great unwashed and uninformed - wheel above, depositing their dung.

Where were these "concerned" civil servants when Strategic and Hanover and Bridgecorp and Provincial and Capital/Merchant and MFS and Babcock & Brown, etc., etc., committed their various acts of public hurt? Nowhere to be seen!

What utter hypocrisy.

What utter rubbish.

So Hubbard is untouchable?

If the public servants do nothing because they have done nothing in the past against other finance companies, they must not take action now when there's concerns?

The Securities Commission and SFO better have sold evidence to take such a drastic action. One senses that some serious soul-searching was done before this action was taken.

Always remember what AB all time legend Colin Meads said : "SOLID AS".

[Onthemoney]

The main concern of the government from what I hear is they want to keep all the marbles in one bag before the marbles become lost. Certainly noticeable tonight that we are all mortal and Alan is not the man he once was....

[COLIN]

[QUOTE=Balance;308604]What utter rubbish.

QUOTE]

I will treat that comment with the contempt it deserves.

[MrDevine]

This move has got to be all about saving the taxpayer from a couple of billion dollars in lost assets. They will wind up SCF over the next few years, us taxpayers will lose a bit of a cash, but SCF shareholders should get most of their money back.

Yes it's drastic action, no Alan Hubbard isn't untouchable and these are extraordinary times. Who knows what skeletons are in the closet down in Timaru. This doesn't have much to do with Hotchin/Watson and co because shareholders in those companies opted for moratorium instead of recievership when they could have nailed them to the wall. And those comapanies weren't underwritten by 'we' the taxpayer.

Mr D

[minimoke]

Where were these "concerned" civil servants when Strategic and Hanover and Bridgecorp and Provincial and Capital/Merchant and MFS and Babcock & Brown, etc., etc., committed their various acts of public hurt? Nowhere to be seen!
Now thats a very good question - indeed they were no where to be seen late 2006 early 2007. I started the Divestor thread in Sept 07 and even then it wasn't until Feb 2008 that Leanne Dalziel finally got Labour off its fat bum and introduced the Financial Advisors Bill.

But look at the alarm bells: Nathans, National and Provincial went under in 06 but the "biggie" - Bridgecorp went under in 07. The punters had the alarm bells ringing but still they got sucked in by the TV and newspaper advertisements and high interest rate offerings - until the the Finance Companies cottoned onto that risk profile and started dropping their rates so the punters got less for higher risk. No number of Civil Servants could have stopped the rush of punters towards these finance companies.

But eventually the government did move. They got the Financial Advisor Bill through so the punters should have more faith in the quality of their advice and the Deposit Guarantee scheme then went and undermined that by backing any old punt. And even then the punters (in Hanovers case) kept chasing the lure of the golden dollar - what does it take to prevent people from hurting themselves?

So now we have a "Concerned" Civil Servant who is finally prepared to make a move - and you cry foul! And the AH followers (just like Buffet disciples) follow blindly on.

I am confident the govt would not have moved on AH and his wife if there wasn't something of substance to back their concerns. The question remains "how much substance".

I'm sure there are many punters who reckoned the sun shone out of Alan Hawkins (I did!), Doug Edgar Somers, Hotchin and definitely Watson, Petricevic and Madoff, Versalko, William Gibson, Peter Marshall, Mark Bryers - how many more do I need to name?. But eventually a concerned civil servant, in some cases made a made. Regardless of the CSS the punters view of these people is now a little different - but it sure took a heck of a lot to open their eyes.

[CJ]

I dont follow SCF but my views are:

- It is very tragic that his has happened to AH but that doesn't mean that it is unwarranted.
- the fact that nothing happened re Bridgecorp etc is irrelevant. You need to fix your mistakes at some point and considering the Government has already provisioned $500m, this seems a good place to start.
- AH may have done nothing wrong but he obviously hasn't satisfied the officials since the complaint was investigated back in February. The softly - softly approached didn't work so they had to go to this. It was a damned if they do and damned if they don't situation i think. Better to try something and fail rather than do nothing and guarantee failure.

[Enumerate]

The reality is that statutory management of Allan Hubbard is statutory management of SCF. After all, Allan controls Southbury, Southbury controls SCF ... and the government controls Allan.

I expect that things are probably going well, in SCF.

I expect that there is some pressure on Allan given the guarantees he made, probably through Aorangi, to guaranteerite SCF defaulting loans. I would expect that this aspect of Aorangi operations has attracted the concern of the SFO.

Clearly, anyone interested in a SCF stake now believes they can drive a harder bargain. Hence it is bad news that these potential capital inflows will be delayed.

Clearly, debenture investment and rollover in SCF has suffered a knock. Based on the market reaction to the news of Hubbard's investigation - perhaps this will be inconsequential.

I think a deal to refloat SCF will happen. I am torn between feeling that Allan Hubbard should have been left to do the honorable thing - restructure SCF with Southbury taking the hit; and worry that there is a case to be answered under the Companies and Crimes act.

From an investor perspective ... unless you are hot money looking for 8%, a government guarantee and a complex life .... my first choice of SCF010's are still way too expensive, SCFHA's are insanely risky.

[minimoke]

This is likely to be an opportunity for a few beauracrats whose jobs are threatened to justify keeping them for a while longer.
Its a pity they couldnt find the energy when it was really required.
I think, in reality you'll find the beauracrats have more than enough on their plates at the moment - there are loads of directors in the courts and many more under investigation. I don't think they need any more work to justify their wage. I'm no fan of beauracracy but its not a bad thing that they do have the energy to do what they have done - on the face of it they are trying to protect $00's m in the Trusts as well as the spin off effects into SCF. This whole house of cards has been very shaky for a long time but there are many people working hard at trying to keep it all together. If these beauracrats can save the trust depositors and the tax payers who will fork out under the Deposit Guarantee then I'm all for it.

[macduffy]

After all the debacles in the finance company sector it's not surprising that the Securities Commission is now "playing safe" in this case.

Whether such action is justified, we'll have to wait and see.

[winner69]

Looking back on the old SCF accounts Aorangi and one or two those trusts mentioned borrowed money from SCF but the amounts were never disclosed. All seem to have gone now.

Makes you wonder why Aorangi, the vehicle for Alans wealthiest investors, would also want to borrow from SCF

I get the feeling that the back room games and politics of all this is because Hubbard prob doesn't want to have his share of SCF/Southbury watered down too much from the expected recap of SCF .... and the SM is one way to take him out of the equation to speed things up ... just conjecture on my part

Amazing stories going around about all this ... like who was the Aorangi investor who bought this to the attention of the authorities

[Enumerate]

Something doesn't smell right about this ...

AH has been progressively sidelined and isolated from the levers of power in SCF, over the past few months. Statutory Management now effectively puts control of Southbury in government hands.

Allan Hubbard is, effectively, "in check". He is now completely isolated from any key decision effecting SCF.

Maybe Treasury held it's collective nose upon reviewing the SCF accounts presented in support of the government retail deposit guarantee extension, approved it anyway because of the consequences of an SCF administration. However, moves have been afoot to seize control of Southbury and to stitch up a salvage deal. Clearly, Allan Hubbard is the patsy ... he will take the loss in Southbury with a dilution and loss of control over interests in SCF.

Events over the last six months can be interpreted as the unfolding of a master plan. If this is indeed the case, beware. It basically means that private property does not exist in New Zealand. If you get between the government and it's financial interests ... your property rights will be extinguished.

In any event, the SFO better move quickly to prove a charge or be prepared for a public spanking on Allan Hubbard's knee.

[Balance]

Looks really bad :

"The Companies Office found that NZ$98 million in funds lent to Aorangi by 407 Otago and Canterbury investors had been lent on either directly or indirectly to trusts and interests associated with the Hubbards, contrary to instructions that they be lent as first mortgages secured by property."

[sharer]

SCF 22/06/2010 PROSPECT REL: 0910 HRS South Canterbury Finance Ltd PROSPECT: SCF010: South Canterbury Finance registers amendments to its prospe 22 June 2010 South Canterbury Finance registers amendments to its prospectus South Canterbury Finance Limited registered a memorandum of amendment to its current prospectus and investment statement yesterday, Monday, 21 June 2010. South Canterbury Finance Chief Executive Officer Sandy Maier says the Company fulfills its obligations to keep investors informed by registering amendments when there are material events that require the investment statement and prospectus to be updated. Both documents are available on the Company's website: www.scf.co.nz Ends

[sharer]

Seemingly the above Amendment to the Prospectus would make it legal to immediately proceed with allocating funds already collected by SCF, as well as new funds got in from recent public meetings & advts. And the fundraising efforts & restructuring at SCF can resume, presumably with even greater urgency.

[Breastwork]

"South Canterbury Finance has had its credit rating cut from B+ to B- by Standard & Poor's on concerns the statutory management of owner Allan Hubbard's interests will damage investor confidence."

[minimoke]

"South Canterbury Finance has had its credit rating cut from B+ to B- by Standard & Poor's on concerns the statutory management of owner Allan Hubbard's interests will damage investor confidence."
Its gone down to a B-/C and Sandy can still put a positive spin on it: 'If anything, the rating action reinforces the determination of the directors and management to build on the good progress already achieved to turnaround the business of the company.''. Great to know the Directors determination is being reinforced -

[winner69]

The more you think about it the more obvious that the whole Hubbard empire should officially be in receievership / statutatory management or whatever

Its obviously been treated as Alans pile of money to do what he wants to do with it ... so many related party transactions is why the whole empire needs to be wound up .... not this de facto charade we have at the moment

If the govt guarantee is called up how long is the money tied up before the punters get their money back? I assume it is dead money in the interim?

Wonder who the whistleblower was?.

[QOH]

What a travesty. Alan Hubbard gets his good name besmirched, while real rogues like Hotchin and Watson go free.

The young lion - aka Kerr - is already circling, sensing that the old lion has lost his strength. And meanwhile the vultures and other carrion creatures - aka the great unwashed and uninformed - wheel above, depositing their dung.

Where were these "concerned" civil servants when Strategic and Hanover and Bridgecorp and Provincial and Capital/Merchant and MFS and Babcock & Brown, etc., etc., committed their various acts of public hurt? Nowhere to be seen!

What utter hypocrisy.

Totally agree with you. I have yet to see anything that shows Hubbard is not an honourable man. His only mistake may have been to trust those running the business.
Sad that a man who appears to have done so much for charities in NZ is being crucified like this without even a trial, and to put him in the same category as the Hotchins etc of the financial world.

[Marilyn Munroe]

Whoop-whoop, Terrain, whoop-whoop, pull up, whoop-whoop, terrain pull up pull up!

Boop boop de do

Marilyn

[winner69]

Hubbards hometown newspaper, the Timaru Herald, has an ironic sense of humour ..... lots of stories about the home town boy as well as an article on how Madoff funnelled $9 billion or some outrageous amount to his close associates before being arrested

[Balance]

Totally agree with you. I have yet to see anything that shows Hubbard is not an honourable man. His only mistake may have been to trust those running the business.
Sad that a man who appears to have done so much for charities in NZ is being crucified like this without even a trial, and to put him in the same category as the Hotchins etc of the financial world.

Madoff was very honorable with other people's money - never missed a single interest payment or redemption - until he got caught.

Madoff donated generously to charities as well.

So easy to be charitable with other people's monies.

http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2010/03/08/charities_give_up_madoff_tainted_donations/

And BTW, Hubbard was running the trusts, not some employees.

"The Companies Office found that NZ$98 million in funds lent to Aorangi by 407 Otago and Canterbury investors had been lent on either directly or indirectly to trusts and interests associated with the Hubbards, contrary to instructions that they be lent as first mortgages secured by property."

More facts and infor to come out yet.

Colin Meads : "Solid As".

[winner69]

Poor bugger ... can't even go to the office any more

http://www.stuff.co.nz/business/industries/3842347/Hubbard-committed-to-staying-as-managers-inflict-cruellest-blow

[Awamoa]

Madoff was very honorable with other people's money - never missed a single interest payment or redemption - until he got caught.

Madoff donated generously to charities as well.

So easy to be charitable with other people's monies.

http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2010/03/08/charities_give_up_madoff_tainted_donations/

And BTW, Hubbard was running the trusts, not some employees.

"The Companies Office found that NZ$98 million in funds lent to Aorangi by 407 Otago and Canterbury investors had been lent on either directly or indirectly to trusts and interests associated with the Hubbards, contrary to instructions that they be lent as first mortgages secured by property."

More facts and infor to come out yet.

Colin Meads : "Solid As".
So our judge jury and executioner has found the man guilty?
Amazing

[Dubdee]

SCF approaches Crises point:

It looks like the SCf 010 would be a great trade at 70 cents in the dollar. Either SCF hits the wall soon and the GG gives you $1.00 back or Maier gets his equity injection and the bonds all rally. Either way a trade with little downside

[Alan3285]

The SCFHAs are getting down towards a realistic price. I'm not buying into a downwards momentuum like that though - sentiment might put them below 10c in the near future - difficult to justify a valuation.

Alan.

[Balance]

So our judge jury and executioner has found the man guilty?
Amazing

Don't put words into my posting - it does you and all the AH cheerleaders no credit whatsoever.

I am simply drawing your attention to the fact that you guys are the ones who hold him up as 'untouchable' due to his charitable acts etc. Madoff provides a great perspective of what can lurk under a persona.

Good luck to AH but if he has been using investors' monies contrary to their instructions - the die is cast.

[peat]

For those looking for a background to the man there is a bit of a social history here
http://www.listener.co.nz/issue/3654/features/15459/a_south_canterbury_tale.html

[minimoke]

I am simply drawing your attention to the fact that you guys are the ones who hold him up as 'untouchable' due to his charitable acts etc. Madoff provides a great perspective of what can lurk under a persona.

There is a risk Cantabrians (and Southlanders) can be a bit one eyed over this. They forget though that just because you are rich and do noble things doesn't mean that things cant go wrong. Take Peter Stewart, son of revered Sir Robertson Stewart who founded PDL. For 40 years he lived with sodomy, rape and indecency offences against an 8 year old and lead an otherwise blameless life.

Now I'm not for a moment putting AH in the category of sex offender (we can leave Graham Capill to hold that mantle) - however the one-eyed adorees possibly need to reflect that SCF is in the situation it is now because of AH's guardianship, despite best efforts to pin Lachie Mcleod as the scapegoat.

That AH has done great things is incontrovertible; that he has perhaps exercised cloudy judgement is debatable; that he has committed criminal offences has yet to be determined.

Without a doubt SCF now need to rapidly isolate itself from AH. SCF is big business - its not work scheme for the aged and infirm. That he appears not to have a succession plan should be of concern to SCF punters. A man who appears to not recognise his own mortality is, perhaps not the best person to be leading SCF out of the quagmire. An enforced break may give SCF the edge it needs.

[Kees]

amazing story bit like the godfather specially the bit helping 100 young farmers with % free loans costing 40 mil of is own money
what a laugh it's a peter pays paul storey and peter has stopped paying just like madoff .

[Balance]

There is a risk Cantabrians (and Southlanders) can be a bit one eyed over this. They forget though that just because you are rich and do noble things doesn't mean that things cant go wrong.

It is one of the endearing features that SInlanders are one eyed about things.

The endearing part goes out the window however when they start preaching conspiracy against others - when the information has been there for a while that AH has been using SCF like his own war-chest to do whatever he felt like doing.

The level of related party transactions was and is a huge window into SCF and AH style of looking after investors' monies.

In the end though, the truth will prevail - if AH has not been using investors' monies for his own purposes, then he has nothing to fear and will be totally vindicated. SIslanders and Cantabrians can rejoice and the govt agencies have suffered a setback from which they will not recover.

[minimoke]

It ... the govt agencies have suffered a setback from which they will not recover.
I get the sense that the government agencies (as well as the Government and individual Ministers including Key and English) are very well aware of the risks surrounding SCF and AH. I also sense that they would not have embarked on this latest course of action unless they had very real concerns that could be substantiated.

This is not a case of some quaint country bookkeeper looking after Nanas nest egg to afford himself a slap up meal of Steak and Chips at the local Cobb and Co which keeps the neighbors daughter employed as a waitress. People are losing sight that there is $000's m at stake hear - and ultimately the tax payer is the one propping up this house of cards and who is facing the prospect of working for many years to pay the taxes to give to the people who, with one eye closed, gave their money to SCF.

[Enumerate]

For those looking for a background to the man there is a bit of a social history ...


I must admit, I didn't know the Allan Hubbard story. It is all the more upsetting, when you understand his history, where he finds himself, today. I sincerely hope that things work out for the best, for him (and his wife),

I think he has good support from Maier. If anyone can intelligently call the shots and manage the psychology ... it is Maier.

Practically speaking ... I just may have to buy some SCF debentures ... to do my bit.

[QOH]

I keep looking at the SCF010's and think what am I missing, surely buying at 38% has got to be a bargain, there doesn't seem any way now that SCF can survive.

[GTM 3442]

I think he has good support from Maier. If anyone can intelligently call the shots and manage the psychology ... it is Maier.

That ties in rather nicely with what Olly Newland had to say about Maier in one of his books. Seems like Mr M likes a challenge ! ! !

[winner69]

Minimoke .... can you change the little photo under your name to a golden VW to fit the occasion

[Balance]

I keep looking at the SCF010's and think what am I missing, surely buying at 38% has got to be a bargain, there doesn't seem any way now that SCF can survive.

Statutory management - it may take 5 to 10 years before you get your money back. Interest stops accruing from day SCF goes into receivership (if). So time value of money means your money is stuck and you do not earn any interest.

Market is not dumb - some investors may be.

[Enumerate]

In financial terms, comparing Allan Hubbard with Bernie Madoff is like, in political terms, comparing Mahatma Gandhi with Joseph Stalin.

I think that it is quite clear that running a $20million Timaru finance company based on "handshake" contracts and 50's era documentation process does not work for a national, $2billion, finance business.

Sprinkle in the trials and tribulations of a lending boom during a property bubble, the liquidity crunch of the GFC, failure of a bunch of "new mates" to meet their basic obligations ... result is a lot of very worried people who realise they lent too much.

Has the SFO over reacted?

At this stage, who knows. However, it better be some significant charge, that sticks and not some vague worry that Allan was running a $100million finance company out of a shoe box. (The associated shoe, belonging to his mother ... Old mother Hubbard ... (sorry, couldn't resist)).

[minimoke]

In financial terms, comparing Allan Hubbard with Bernie Madoff is like, in political terms, comparing Mahatma Gandhi with Joseph Stalin.

Enumerate
I'm not sure anyone here is comparing AH directly with Madoff (watson hotchin et al).

That some comparisons (such as Maddof was highly respected for his philanthropic work amongst the Jewish community prior to 2009) can be drawn is valid but there is no evidence of fraudulent or criminal behavior on AH's part so there is no basis for any comments that might infer that.

What is causing me (as a tax payer) concern now is the one eyed adoration which is losing all sense of perspective. Todays newspaper ads are starting to resemble the David Bain Fan Club with their startling inability to focus on the known facts of the present situation - preferring to rely on personality and past deeds. Don't get me wrong - those past deeds should be recognised and celebrated. But today it is the tax payer who is standing behind the punters who are throwing their money into SCF based on AH's reputation rather than on SCF's ability to survive on its own two feet.

[QOH]

Read this on NZ herald site. Which 3 categories are not covered by the Govt guarantee?

"Most of South Canterbury's 30,000 investors have the Government's backing after the business qualified for a guarantee protecting most categories of deposits. However three categories of NZDX-listed shares do not qualify for the guarantee."

[CJ]

... there is no evidence of fraudulent or criminal behavior on AH's part so there is no basis for any comments that might infer that. Then why are the Serious Fraud Office investigating. I can only assume they beleive there is evidence of serious fraud.

[minimoke]

Then why are the Serious Fraud Office investigating. I can only assume they beleive there is evidence of serious fraud.

Essentially a complaint has been made and issues raised. Investigations are being carried out to firstly determine if there is any substance to those issues. Riding tandem to that is the securing of data (copy paper files , securing hard drives etc) and preventing the movement of funds which may not be in the interests of investors. It may be that the investigations find there is no substance - in which case SecCom and SFO go home with their tails between their legs (but holding the moral high ground because they are "working in the interests of investors" - though why they never did this for Hanover, Bridgecorp etc remains a question to be asked). If there is substance they then have to work out if any offences have been committed. From there they work out if its in the public interest to pursue charges - if so they then get the evidence together and enough evidence to support whoever is going to prosecute those charges. Still early days.

[Enumerate]

What is causing me (as a tax payer) concern now is the one eyed adoration which is losing all sense of perspective.


I agree with you. However, I do maintain a different perspective:

1) Tax payer exposure to SCF through the deposit guarantee was unsolicited by SCF. Another of Cullen's blunders ... Once the guarantee scheme was enacted, there was no choice but to subscribe. The government has no moral right to "defend it's interest" in SCF because it imposed a stupid guarantee on retail deposits.

2) Are Allan Hubbard's supporters excessive and irrational in their support. Too bloody right! Ask yourself why this large community of people exists and why they are voicing such extreme opinions. This gives credibility to the Alon Hubbard legends. It makes me think that SCF will be well supported by a core constituency when the time comes to rolling over the "wall of debt".

3) The issue is not "are Hubbard supporters right or is the SFO right about Hubbard's integrity?". The Registrar of Companies is no fool and has integrity that would match (or exceed) Allan Hubbard. Adam Feeley has been recently appointed to head the SFO. There has been a significant restructure there and a massive step up in the energy and enthusiasm in addressing potential breaches of the various securities acts. This is a very good thing. I think Allan Hubbard is a man of the highest integrity. I also think our bureaucrats are also of the highest integrity and are now working for a Minister that has put intellectual muscle and moral fibre in place to investigate and persue cases. The former minister (Dalziel) was clearly not up to the task and the pre-Feeley SFO matched this degree of incompetence.

I can see this situation can have a positive outcome. The days of informal governance at SCF, based on Allan Hubbard's informal loans processes are over. Maier is in charge now. Allan's wider activities will also be brought into line - the SFO probe will see to that. Allan will be cleared of malicious wrong doing - his integrity will be intact. There will be some changes to the governance of Aorangi and trusts - this will also be a good thing. The SFO will prove it can act and will act ... this will be a triumph for the Minister.

A number of good things will result from this process.

[minimoke]

I agree with you. However, I do maintain a different perspective:
not really too different!


1) Tax payer exposure to SCF through the deposit guarantee was unsolicited by SCF.
SCF went into the guarantee voluntarily - they could have just said "we stand by the integrity of AH and the strength of our books and do not need the Guarantee. Similarly depositors could have shown their support by investing in non-govt guaranteed deposits. That neither did this should raise concerns and neither should expect the tax payer to back them - particularly now.


2) Are Allan Hubbard's supporters excessive and irrational in their support. Too bloody right! I am stunned beyond belief that they seem to think it is OK to be running a sizeable business apparently without systems or paper work. They are quite entitled to think SCF is like getting a newspaper on tick at the local dairy, or a piggy bank with a lose bung - but again the tax payer should not be backing them


3) The Registrar of Companies is no fool and has integrity that would match (or exceed) Allan Hubbard. And I'm amazed the One Eyed supporters are making it so personal. Its not about AH - theres is a much much bigger picture. And we can all give thanks to Dalziels departure - she was a total waste of space .


Maier is in charge now. If Maier can pull SCF through now it will be something no less than miraculous. Perhaps he is really AH's legacy.

[Alan3285]

Read this on NZ herald site. Which 3 categories are not covered by the Govt guarantee?

"Most of South Canterbury's 30,000 investors have the Government's backing after the business qualified for a guarantee protecting most categories of deposits. However three categories of NZDX-listed shares do not qualify for the guarantee."

I can only think of four listed securities:

SCF010
SCF020
SCF030
SCFHA

Of those, certainly the SCF010 and SCFHA are not covered in the sense that they mature after the EGS expires (or never in the case of the HA perpetuals).

I'm not certain, but the SCF020 and SCF030 have (previously) been trading as if they are covered.

Alan.

[sharer]

Read this on NZ herald site. Which 3 categories are not covered by the Govt guarantee?

"Most of South Canterbury's 30,000 investors have the Government's backing after the business qualified for a guarantee protecting most categories of deposits. However three categories of NZDX-listed shares do not qualify for the guarantee."

Several interesting comments in this article ...
http://www.nzherald.co.nz/investment-companies/news/article.cfm?c_id=56&objectid=10653710&pnum=1

[CJ]

Essentially a complaint has been made and issues raised. Investigations are being carried out to firstly determine if there is any substance to those issues.I was under the impression the complaint was laid some time ago and it was determined there was substance to that complaint, hence the sever actions taken. Otherwise they would have given AH more time as he requested.

Note: l hope for the sake of the Govt guarantee that there is no fraud or other issues and that SCF can trade out.

[minimoke]

I was under the impression the complaint was laid some time ago and it was determined there was substance to that complaint, hence the sever actions taken. Otherwise they would have given AH more time as he requested.

I'd imagine there is a bit of difference between the substance of a complaint involving one punter who did not get a Prospectus and whatever else it was that raised concern.

[Enumerate]

I note that Chris Lee, in Taking Stock, on his well known web site, takes a very subdued tone on the Statutory Management of Allan Hubbard, his wife, and certain companies. His commentary comes at the end of the multi-topic'ed blog - almost as a footnote. About the only point he makes is that he reckognises that the deep subordination of the perpetuals put them at the highest risk, if SCF folds. I am not really sure if he is saying "sell SCFHA" - you need to read for yourselves at www.chrislee.co.nz.

It is very strange that while Chris Lee seems to be approaching a nadir of despond on SCF, I am beginning to see the signs of capitulation as a buying opportunity!!

[COLIN]

In financial terms, comparing Allan Hubbard with Bernie Madoff is like, in political terms, comparing Mahatma Gandhi with Joseph Stalin.


Has the SFO over reacted?

At this stage, who knows. However, it better be some significant charge, that sticks and not some vague worry that Allan was running a $100million finance company out of a shoe box. (The associated shoe, belonging to his mother ... Old mother Hubbard ... (sorry, couldn't resist)).

There is a piece by veteran reporter Vernon Smellie on www.stuff.co.nz (Business Wire) today which is worthwhile reading. He quotes the views of McDouall Stuart, along these lines.

Something that alarms me is the following quote in today's "Press" from Feeley, the SFO guy:

"We have reasonable belief an offence may have been committed but that is quite different from saying there is a case to be answered and charges to be laid. IF ANYTHING, THAT BELIEF COULDN'T BE FURTHER FROM THE TRUTH". If that is the case, then why the blazes have they gone about this in a way that, in all probability, has dealt a mortal blow to any chance that SCF can be placed on an even keel. Sure, the Registrar of Companies should investigate any perceived non-compliance with the law, but why announce to the world that they suspect SERIOUS FRAUD until such is proven, if in fact it does exist?

One of the ironies is that the Government says it has taken these moves "to protect investors in Aorangi Securities"; but what about the thousands of Mums and Dads and Grandmas and Grandpas who hold investments in the SCF 2012 bonds and the perpetual prefs; these are not protected by the Govt Gtee, and the SFO's actions have virtually now guaranteed that they will be deeply out of pocket, whereas probably not one cent of Aorangi investors' interest or capital will be at risk.

Another point that doesn't seem to have received much airing: Aorangi doesn't appear to have been soliciting money from the public in general, but its nature is rather that of a club of wealthy friends of Allan's, who have been using his skills to invest on their behalf. That being the case, why the need for a prospectus, etc? If I get together with some of my mates and they decide to pool their cash and have me invest it for them, at what point do I have to register a prospectus?

Just some musings aloud. And its good to see some well-reasoned, balanced, objective contributions coming through on this thread, from the likes of yourself and Minimoke.

Cheers.

[westerly]

[QUOTE=COLIN;308928].

Something that alarms me is the following quote in today's "Press" from Feeley, the SFO guy:

"We have reasonable belief an offence may have been committed but that is quite different from saying there is a case to be answered and charges to be laid. IF ANYTHING, THAT BELIEF COULDN'T BE FURTHER FROM THE TRUTH". If that is the case, then why the blazes have they gone about this in a way that, in all probability, has dealt a mortal blow to any chance that SCF can be placed on an even keel. Sure, the Registrar of Companies should investigate any perceived non-compliance with the law, but why announce to the world that they suspect SERIOUS FRAUD until such is proven, if in fact it does exist?

One of the ironies is that the Government says it has taken these moves "to protect investors in Aorangi Securities"; but what about the thousands of Mums and Dads and Grandmas and Grandpas who hold investments in the SCF 2012 bonds and the perpetual prefs; these are not protected by the Govt Gtee, and the SFO's actions have virtually now guaranteed that they will be deeply out of pocket, whereas probably not one cent of Aorangi investors' interest or capital will be at risk.


Couldn't agree more Colin

As someone who usually believes -"always expect the worst and you won't be disappointed" I am on Allan Hubbards side in this.
However until the whole business is clarified there is this lingering doubt?

Westerly

[Enumerate]

There is a piece by veteran reporter Vernon Smellie on www.stuff.co.nz (Business Wire) today which is worthwhile reading.


Very good article - had to dig it out - it is syndicated across a number of publishers - here is a one that came up on google:

http://business.scoop.co.nz/2010/06/23/smellie-sniffs-the-breeze-what-if/

I have read quite a bit today about Hubbard, Aorangi, etc. etc. One point that struck me (that I now can't find and properly attribute) is that SCF traded in the space of emerging and developing business. This sector of the economy is vital to the vibrancy of the economy - because this is the crucible of new investment - in which tomorrows growth companies are shaped. Hubbard's style was perfect for the nurturing and growth of these companies.

The haunting conclusion was that the failure of SCF would see these companies starved of cash at a vital stage of their development. The banks aren't interested ... the government has no clue ... other finance companies are too small or too weak to fill the void.

When you read about the Hubbard legends ("Hubbardology") - I get the sense that SCF was seminal in arranging so much productive investment, in the South Island, that the place would be significantly poorer without his financing vision.

I think alot of people recognise this contribution to their well being. It was achieved without government intervention or support, without bank support, even when the people beneficially effected couldn't share the vision, at the time.

I just wish I could remember the article and author who made these points - to cite properly.

[COLIN]

Very good article - had to dig it out - it is syndicated across a number of publishers - here is a one that came up on google:

http://business.scoop.co.nz/2010/06/23/smellie-sniffs-the-breeze-what-if/

I have read quite a bit today about Hubbard, Aorangi, etc. etc. One point that struck me (that I now can't find and properly attribute) is that SCF traded in the space of emerging and developing business. This sector of the economy is vital to the vibrancy of the economy - because this is the crucible of new investment - in which tomorrows growth companies are shaped. Hubbard's style was perfect for the nurturing and growth of these companies.

The haunting conclusion was that the failure of SCF would see these companies starved of cash at a vital stage of their development. The banks aren't interested ... the government has no clue ... other finance companies are too small or too weak to fill the void.

When you read about the Hubbard legends ("Hubbardology") - I get the sense that SCF was seminal in arranging so much productive investment, in the South Island, that the place would be significantly poorer without his financing vision.

I think alot of people recognise this contribution to their well being. It was achieved without government intervention or support, without bank support, even when the people beneficially effected couldn't share the vision, at the time.

I just wish I could remember the article and author who made these points - to cite properly.

I haven't read that article but, yes, I think the thrust of your recall does capture the setting. One has to live in the South Island to fully appreciate the intensity of feeling there is, in these parts, about the perceived harm and injustice arising from last weekend's developments. I have little doubt that it could do electoral harm to the ruling coalition; South Islanders, rightly or wrongly, tend to regard North Island "suits" with a certain amount of suspicion and even disdain. And when one of their own is perceived to have been treated shabbily, they react.

It is, of course, a great pity that Allan had not moved years ago to make proper succession plans for his booming business interests. When he first talked about going to the capital markets a few years ago, it was going to be on the basis of a public float of part of the company. But, unfortunately, he then decided to pull back and, instead, went with that preferential share issue (SCFHA). If, instead, he had admitted other ordinary shareholders, along with some independent directors, and then gradually reduced his own percentage ownership, I think the present situation might have been averted.

[CJ]

In the Independent (i think) it said he was relunctant to move to electronic records as he was a technophobe (rightly so for someone his age). Apparently he also keep a private book of loans for those he knew (ie the personal touch).

Agree with Colin, this could have significant impact on investment in the South Island. There is no doubt he helped a lot of people get to where they are today.

[Enumerate]

Timaru shows support for Allan Hubbard:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10654352

Amazing! Vox populi, vox dei. It is quite clear that a significant body of NZers believe that an injustice is brewing ...

Given the demonstration that our politicians cannot behave with integrity with their expenses, that our public officials have a very patchy record in enforcing our finance and securities laws ... I don't think there is much public patience with the direction the Minister has taken.

People will be long suffering in terms of being ripped off by Petricevic, Watson, Hotchin and Bryers (and a host of others). However, they will not stand for the perceived injustice against Hubbard.

What a wonderful country.

[Alan3285]

If they are right (and I would currently be very surprised if AH is guilty of 'theft' of funds or anything close), then I think this reaction is exactly right.

It is one thing to lose (or see others lose) out to a con-man, but seeing an innocent man be dragged through the mud is much worse and makes most decent people quite angry.

We'll see, but if this is just a 'paperwork' issue then I think the administration will have mucho problemo.

On a separate note, I thought it was interesting that John Key was so strong in his backing of Simon Power. He could easily has said, "I won't comment on an ongoing investigation" and left it at that. Why go further ahead of any findings / investigation?

Alan.

[GTM 3442]

Were SCF to be put into Statutory Management, would that make it ineligible for the Government guarantee ?

[Enumerate]

Were SCF to be put into Statutory Management, would that make it ineligible for the Government guarantee ?

Complex question.

Effectively, the RDGS applies to organisations that have met the RDGS terms, been approved, payed the costs ... and continue to meet the terms of their lending trust deed.

The powers of Statutory Management are detailed in the Corporations (Investigation and Management) Act 1989 ("CIMA"). Statutory Management is a measure of last resort to be used if:

* The affairs of the corporation cannot adequately be dealt with by any other formal and collective insolvency regime; or
* The public interest requires it to be used.

Could you envisage a situation in which SCF maintains the integrity of it's Trust Deed - but is put into Stat Mgment .... why yes!

Could you envisage a situation in which SCF violates the integrity of it's Trust Deed - and is put into Stat Mgment .... why yes!

In the first situation, the guarantee is applied to the retail depositors. In the second situation, it is not.

[COLIN]

If they are right (and I would currently be very surprised if AH is guilty of 'theft' of funds or anything close), then I think this reaction is exactly right.

It is one thing to lose (or see others lose) out to a con-man, but seeing an innocent man be dragged through the mud is much worse and makes most decent people quite angry.

We'll see, but if this is just a 'paperwork' issue then I think the administration will have mucho problemo.

On a separate note, I thought it was interesting that John Key was so strong in his backing of Simon Power. He could easily has said, "I won't comment on an ongoing investigation" and left it at that. Why go further ahead of any findings / investigation?

Alan.
I am in the process of drafting a letter to the Chairman of the Securities Commission, which I will be copying to Simon Power, expressing my alarm at the content of the following statement by the SCOM spokesperson, Roger Marwick, quoted in today's Press, in relation to the alleged conflict of interest arising from the fact that Simon Botherway's brother's business was placed into receivership by SCF last year. For those who haven't seen the article, I quote as follows:

"Securities commission spokesperson Roger Marwick said chairwoman Jane Diplock was made aware of the connection yesterday, five days after the recommendation was made to the minister to put Hubbard's business interests into statutory management, but did not believe there was a conflict of interest.

"There is no conflict of interest in this issue BECAUSE THE STATUTORY MANAGEMENT DOES NOT AFFECT SOUTH CANTERBURY FINANCE." (my capital letters.)

I am incredulous that such a ridiculously naive statement could be made, on behalf of the body that is supposed to be overseeing the conduct of the securities market in this country. The Statutory Management notices might not have included South Canterbury Finance in word, but they certainly have in effect, as borne out by Standard and Poor's immediate downgrading of their credit rating. And, if SCF is not part of "Hubbard's business interests" then I'm a Martian.

This whole fiasco deplores me.

[Enumerate]

A couple of months back, Percy made the following observation:



I spoke to Paul Preston one time.I asked him why he worked to save Smiths City.He told me he sorted out The Farmers after Chase Corp ran into troubles.
He said he saw the same customer,supplier goodwill with Smiths that he found was the key to saving the Farmers. Possibily Maier,Kerr and others see this with SCF.?


The recent support for Allan Hubbard on Facebook, newspapers and the streets of Timaru makes me believe that there is strength in the SCF recovery that cannot be underestimated.

I bought some SCFHA, today. Paid a bit more for them than I like ...

I note the clear capability of Sandy Maier in conducting the turnaround. I note the introduction of Helicopters and Scales into SCF addiing to the SCFHA security. However, it is this customer loyalty ... same as SCY ... that convinces me that the recovery probability is greater than 17%.

Please, do your own research on this ... there are still very significant risks with credible people saying SCF failure is a certainty. SCFHA holders share Allan Hubbard's fate if it turns pear shaped - there will be minimal chance of a recovery on default.

[Enumerate]

"Securities commission spokesperson Roger Marwick said chairwoman Jane Diplock was made aware of the connection yesterday, five days after the recommendation was made to the minister to put Hubbard's business interests into statutory management, but did not believe there was a conflict of interest.

"There is no conflict of interest in this issue BECAUSE THE STATUTORY MANAGEMENT DOES NOT AFFECT SOUTH CANTERBURY FINANCE." (my capital letters.)

I am incredulous that such a ridiculously naive statement could be made, on behalf of the body that is supposed to be overseeing the conduct of the securities market in this country. The Statutory Management notices might not have included South Canterbury Finance in word, but they certainly have in effect, as borne out by Standard and Poor's immediate downgrading of their credit rating. And, if SCF is not part of "Hubbard's business interests" then I'm a Martian.


1) Diplock was advised AFTER the decision was taken ... she should have noted that the conflict of interest should have been declared before the decision.

2) Stat Management of Aorangi is a singular step to take. You are right that the impression that this would have no commercial implications for SCF beggars belief.

3) The reason cited is specious, anyway. The conflict can be construed between Hubbard and Botherway - it should have been declared BECAUSE Hubbard, Aorangi (owned by Hubbard) etc were the subjects of the Stat Mgmnt decision. Disclaiming harm on SCF is irrelevant and in no way a justification of a lack of conflict of interest.

4) If Botherway felt no conflict of interest existed between him deciding to put Hubbard into Stat Management because SCF put his brother in to recievership - then no conflict of interest should have been declared to Diplock.

What a complete shambles.

Diplock - just resign.

Botherway - just resign.

You are playing the NZ public for FOOLS!

[westerly]

"just wish I could remember the article and author who made these points - to cite properly. "

Colin

There is an article from the Listner May 27 by Rebecca Macfie still available on the Listner website which is the best I have read on SCF and Allan Hubbard

Westerly

[Alex]

Complex question.

Effectively, the RDGS applies to organisations that have met the RDGS terms, been approved, payed the costs ... and continue to meet the terms of their lending trust deed.

The powers of Statutory Management are detailed in the Corporations (Investigation and Management) Act 1989 ("CIMA"). Statutory Management is a measure of last resort to be used if:

* The affairs of the corporation cannot adequately be dealt with by any other formal and collective insolvency regime; or
* The public interest requires it to be used.

Could you envisage a situation in which SCF maintains the integrity of it's Trust Deed - but is put into Stat Mgment .... why yes!

Could you envisage a situation in which SCF violates the integrity of it's Trust Deed - and is put into Stat Mgment .... why yes!

In the first situation, the guarantee is applied to the retail depositors. In the second situation, it is not.


test, pls ignore

[Alex]

Complex question.

Effectively, the RDGS applies to organisations that have met the RDGS terms, been approved, payed the costs ... and continue to meet the terms of their lending trust deed.

The powers of Statutory Management are detailed in the Corporations (Investigation and Management) Act 1989 ("CIMA"). Statutory Management is a measure of last resort to be used if:

* The affairs of the corporation cannot adequately be dealt with by any other formal and collective insolvency regime; or
* The public interest requires it to be used.

Could you envisage a situation in which SCF maintains the integrity of it's Trust Deed - but is put into Stat Mgment .... why yes!

Could you envisage a situation in which SCF violates the integrity of it's Trust Deed - and is put into Stat Mgment .... why yes!

In the first situation, the guarantee is applied to the retail depositors. In the second situation, it is not.

Have to disagree with the last statement. The appointment of a statutory manager is deemed to be a default event and will trigger the Guarantee, regardless of the reasons for the appointment.

[Enumerate]

Have to disagree with the last statement. The appointment of a statutory manager is deemed to be a default event and will trigger the Guarantee, regardless of the reasons for the appointment.


It is possible to establish a company is in breach of the Trust Deed at a point before the default event. At this point they have violated the RDGS and the guarantee no longer applies.

Directors elect to offer guaranteed deposits and the company pays for this. They have to supply the terms upon which the lending is conducted (the Trust Deed) and they have to prove to be viable financially (the credit rating). If Directors cannot keep their promises (the only statement of this is the Trust Deed) then the government can hardly be expected to pay a guarantee for fraudulent conduct.

[temuk]

Wonder who the whistleblower was?.



Word on the street - "someone from WAIMATE"

[Alex]

It is possible to establish a company is in breach of the Trust Deed at a point before the default event. At this point they have violated the RDGS and the guarantee no longer applies.

Directors elect to offer guaranteed deposits and the company pays for this. They have to supply the terms upon which the lending is conducted (the Trust Deed) and they have to prove to be viable financially (the credit rating). If Directors cannot keep their promises (the only statement of this is the Trust Deed) then the government can hardly be expected to pay a guarantee for fraudulent conduct.

If the Trust Deed is breached or in any of the other relevant events listed in the SCF's Guarantee Deed, the Crown may withdraw the Guarantee, in which case existing (i.e., prior to the withdrawal) eligible debenture holders continue to be covered by the Guarantee. The Guarantee remains valid until officially withdrawn.

[GTM 3442]

Word on the street - "someone from WAIMATE"

Where ? And why the CAPITALS?

[Enumerate]

If the Trust Deed is breached or in any of the other relevant events listed in the SCF's Guarantee Deed, the Crown may withdraw the Guarantee, in which case existing (i.e., prior to the withdrawal) eligible debenture holders continue to be covered by the Guarantee. The Guarantee remains valid until officially withdrawn.


On review ... I think you are right. In fact, it would appear that the guarantee continues on after the withdrawal. Amazing!



3.10 Can the Crown guarantee be taken away from me or from the institution that I have deposited money with?

Updated 23 December 2009

Under the current scheme and the extended scheme, the Crown can withdraw the guarantee if a participating financial institution engages in “inappropriate conduct” such that:

* the benefit of the extended guarantee may be available to persons not intended to receive that benefit;
* such conduct is inconsistent with the Crown's intentions in entering into the extended Crown guarantee;
* the financial institution fails to comply with its relevant obligations under the guarantee deed.

Under the extended scheme, the Crown can also withdraw the guarantee if:

* (in the case of non banks only) the financial institution has come under the control of another person, that the Crown has not first approved;
* there has been a material reduction in the financial institution’s net tangible assets and the Crown's net liability under that guarantee will or may be materially greater as a result of that reduction.

3.11 Are my deposits still covered if the Crown guarantee is changed or withdrawn?

Updated 23 December 2009

Deposits or investments made before withdrawal of the guarantee continue to be covered until expiry of the current retail deposit guarantee scheme on 12 October 2010, unless those deposits become due and payable earlier. New deposits made after withdrawal are not covered. Roll-overs of deposits or investments that have matured are deemed to be new deposits.


Relevant section bolded.

[Dr_Who]

Interesting article by Brian Gaynor.

When the going is good people tend to turn a blind eye, but when things turns to custard, people go head hunting.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10654475

[Enumerate]

The Herald, in editorial and the Gaynor column, is dismissing the public demonstration of outrage in the Hubbard Statutory Management as being irrational. Even Sheppard, is subdued - now that he has his new lark overseeing the reconstruction of government finance and securities regulation and enforcement.

The watchdogs have lost their teeth.

No one points out the fact that Statutory Management is such singular, extreme power - that it's use demands a full explanation. It is not a power that should be used to conduct "fishing expeditions".

Again, the fourth estate proves to be ineffectual when it really matters. No comment on the Botherway/Diplock fiasco - which should put SFO decision making under the spotlight.

However, the fifth estate is alive and well! I would like to call these "media personalities" to account:

Bruce Sheppard, in largely ignoring the Hubbard Statutory Management issues (only commenting on the unstated accounting issues) seems to me to only be interested in self-aggrandisement. Silence is not an option - there are serious issues at stake (new fancy government job, notwithstanding). Seems the Sheppard has been neutered.

Brian Gaynor puts regulation above ethics. Why is there no critical examination of the application of Statutory Management to an individual? Why is there only slavish responses like "all regulations must be adhered to" - when a critical investigation into the "mother of all regulations" (Statutory Managment). It is not "regulation vs personality", Brian - it is "property rights vs regulation":

The following is a historical account of how a government crushed the autonomy of the private sector through onerous regulations, harsh inspections, and the threat of confiscatory fines for petty offenses"



"Industrialists were visited by state auditors who had strict orders to examine the balance sheets and all bookkeeping entries of the company or individual businessman for the preceding two, three or more years until some error or false entry was found," explains Reimann. "The slightest formal mistake was punished with tremendous penalties. A fine of millions of marks was imposed for a single bookkeeping error."


Thie account is from Ludwig von Mises - the economy is Nazi Germany in 1939.

The issue here is: "How is Statutory Management of Allan Hubbard justified?". It is not acceptable that these powers are deployed without explanation. It is not acceptable that we are as to wait weeks while the "fishing expedition" concludes.

It seems a murderer has more rights to due process than Allan Hubbard, in New Zealand. That is why people are upset.

[Alex]

This appointment of statutory managers raised numerous complex and difficult to answer questions, of both practical and philosophical nature. However, it appears that the question about how justified this action was has been at least partially answered, - providing it is true that some of the investors' moneys have been loaned to the Hubbards themselves, contrary to the instructions by investors, and promises by the company, to invest into secured first mortgages.

[Enumerate]

However, it appears that the question about how justified this action was has been at least partially answered, - providing it is true that some of the investors' moneys have been loaned to the Hubbards themselves, contrary to the instructions by investors, and promises by the company, to invest into secured first mortgages.


Lol, Alex ... who are you apologising for?

Given the related party transactions that sunk the raft of errant finance companies ... and not a Statutory Manager in sight.

What about the serious issue of the toxic stinking mess of the Hanover loan book and the amazing evaporating assets ... and not a Statutory Manager in sight.

Here you have Aorangi ... that hasn't defaulted on a single debt ... satisfies the capital adequacy rules (at least pro forma) ... not under the government guarantee scheme ... 100% owned by Hubbard, lendiing to Hubbard. This entity is put into Statutory Management - the most draconian of regulatory powers, in New Zealand. Alex, you claim to be satisfied by the explanation!?! I would suggest, at the very least, that you are easily satisfied.

Alex, this is arbitrary use of extraordinary powers. This needs to be justified ... RIGHT NOW. It is a violation of due process for even serious criminal matters ... this did not go before a Judge ... this is bureaucratic power gone mad.

It is doubly obscene given the Commerce Commission and the SFO have been negligent in declaring their various conflicts of interest.

It is triply obscene given the complete inaction of the statutory authorities, to date; forcing the investing public to endure massive carnage in the finance sector and having the tax payer foot the bill.

Allan Hubbard's integrity is NOT at stake here; Diplock/Feeley/SFO Board integrity is.

Ultimately, it is the Minister who will be accountable.

[Enumerate]

How many Aoriangi investors wrote Allan Hubbard asking to have their money back because they were unsure that the Trust Deed and Prospectus were not in order?

I don't know the answer ... but I feel completely confident that if they asked for their money back ... they would get it.

(This nonsense about the historical contributory mortgage "Trust Deed" violation is so much spin coming from State Officials under some pressure to justify their actions. Alex knows more about this than I do ...)

[macduffy]

I'm still having difficulty in understanding why a prospectus was required if Aorangi only ever raised deposits from habitual, sophisicated investors ( or somesuch persons) ?

I assume that such investors were entitled to know exactly where their money was invested - and entitled to see evidence of mortgage documentation. Otherwise, how would they be in a position to complain that that was not happening?

[Dr_Who]

I'm still having difficulty in understanding why a prospectus was required if Aorangi only ever raised deposits from habitual, sophisicated investors ( or somesuch persons) ?

I assume that such investors were entitled to know exactly where their money was invested - and entitled to see evidence of mortgage documentation. Otherwise, how would they be in a position to complain that that was not happening?

I am not a corporate lawyer, but I think if the investment have more than a certain number of investors they will need to issue as prospectus.

[Alex]

I agree that the use of imposition of statutory management powers appears inconsistent through the recent period that witnessed other finance companies trouble and failures. Have the authorities grown too cautious now, or are there other reasons for the obvious inconsistency? (There’s plenty of all kind of rumours around on this…)

I doubt that engaging of the SFO was necessary. I think that Hubbard is an honest honourable man whose business practices have become somewhat outdated for the world as it is today. Sadly, no matter what the exact outcomes of the investigation are going to be, the consequences for Hubbards and SCF will be detrimental.

[percy]

I was once told there was no sense in sueing anyone who had no money.
There was no use chasing the other finance companies as there was no money.
Chase Hubbard because there is money there!!! He has not spent it on flash houses,flash cars,flash holidays,or flash tarts.

[Enumerate]

The NZ Herald editorial damns those supporting Hubbard as being irrational ...

However, the fourth estate continues to publish details of transactions conducted by Hubbard. There is much tut tut'ing and dark hints about impropriety. However, there are no facts! Even Bernard Hickey is calling for SCF to be put into some form of administration!

Hypocrites.

The NZ Herald editor should follow his own lead in terms of editorial policy. He cannot damn those following the evidence of their own senses and turn around and encourage the unimformed stoning of Hubbard and SCF by his columnists.

Hickey needs to be singled out for censure. How does he know the SCF situation is terminal because of a yet unsubstantiated investigation by the SFO. Talk about irresponsible journalism - this is almost as absurd as his torturing statistics to get them to confess to a 30% drop in property prices. Between Shepperd wittering on about homespun stories about house purchase; Hickey running about shouting that the sky is falling ... I'd say the fourth estate does not have the mental capacity to sort out the various issues presented by arbitrary and abusive use of regulation, outside our normal system of justice, by out of control bureaucrats.

[percy]

[QUOTE=Enumerate;309120]The NZ Herald editorial damns those supporting Hubbard as being irrational ...

Nothing irrational by the way AH has helped so many people.I can think of no one else in NZ who has helped so many as AH.

[Marilyn Munroe]

I thought that some of the actions by South Canterbury Finance had a 'starting to drink seawater' tone to them.

It seems that actions by Alan Hubbard and Aorangi are of a similar nature.

http://www.stuff.co.nz/business/3858575/Spotlight-falls-on-Hubbards-web-of-loans

Boop boop de do

Marilyn

[CJ]

[QUOTE=Enumerate;309120]I can think of no one else in NZ who has helped so many as AH.By helping people, you mean loaning them money and extracting a return on that money to grow a $650m empire???

Yes I know he is charitable as well but dont get the two mixed up. There are many other Rich who donate large sums as well.

[percy]

CJ
AH has a history of helping people banks would not.He was honest and fair at all times so earned people's respect .
I do not think we could say that about Sir Michael,Sir Ron or Sir Bob.

[CJ]

AH has a history of helping people banks would not.Not desputing this. My point was it was still a business transaction.

And to take it one step further, you say he provided loans to people banks wouldn't. So he was taking extra risk. Now that they are being supported by the government guarantee, it is justified for the govt to ensure that that risk is being properly documented and rewarded for.

For the sake of the taxpayer, I hope everything is 'kosher'.

[percy]

Not desputing this. My point was it was still a business transaction.

And to take it one step further, you say he provided loans to people banks wouldn't. So he was taking extra risk. Now that they are being supported by the government guarantee, it is justified for the govt to ensure that that risk is being properly documented and rewarded for.

For the sake of the taxpayer, I hope everything is 'kosher'.

Yes,your statement is right with Govt guarantee every thing must be properly documented.

[Alex]

Yes,your statement is right with Govt guarantee every thing must be properly documented.

I suspect there are more strings attached to the Guarantee than just the requirement to document everything properly...

[temuk]

Where ? And why the CAPITALS?

Waimate 39 km south of Timaru.


Capitals used so it would be easier for you to find on the map!

[mouse]

I cannot understand all the support for Alan Hubbard. The World is into The Long Recession. We may collapse and bottom trawl for 5 years? or longer. The situation is serious. Very Serious. I think the action against AH is part of the Govts reading of the situation. We are told things are improving, light around the corner. Etc. BUT the Govt actions, faced with a $2 billion bail-out, is sheer panic. Government does not believe what Govt is saying.

So take early action to get to grips with SCF etc. The major difference to earlier finance company disasters is the simple fact its now also a Govt Disaster. A $2 billion Govt Disaster. We will see other finance companies in equal stress. Interest rates must go up and business must slow down even more than at present. What this will do to the share market is a bit confused at present.

So, am I right, or even a little right? If I am then things look black. There is no recovery in sight. More good companies will go under.
Comments please.

[Enumerate]

Aorangi is a private company, owned by Hubbard.

None of the sophisticated investors who have money in Aorangi have lost money. No interest payments are in arrears.

Hubbard has his own money in Aorangi, apparently, as both loans to the company and as equity.

If anyone who has lent money to Aorangi is unhappy with the formal arrangements - have they thought of writing a letter or picking up the phone and asking for their money back?

What is wrong with with Hubbard lending money to his network of related entities when he clearly has positive equity in Aorangi? Why can't he lend his own money to himself?

Why does the government need to intervene when there is not a scrap of public evidence that anything wrong is happening in Aorangi? Why cannot the SFO instantly justify it's action with specific case material that would justify intervention to defend the public good? WHERE IS THE CASE THAT THE PUBLIC GOOD IS THREATENED?

Gaynor's diagram in the Herald PROVES NOTHING. The Sunday Star Times "Web of Loans" PROVES NOTHING.

WHERE, MR FEELEY, IS THE CASE THAT THE PUBLIC GOOD IS THREATENED?

Every NZ'er should be up in arms that a government agency has acted in such an arbitrary fashion. Does Adam Feeley actually think he is above and outside the justice system?

Next thing will be he will be after YOU for failing to balance your cheque book! He will put you into Statutory Management and sort out your financial affairs according to the best practice principles of the Ministry of Commerce. This is clearly ridiculous - but it is the apparent state that Allan Hubbard finds himself in.

Statutory Management should have been justified with the announcement of a clear threat to the "public good". All we have is silence ... and feeble journalistic speculation.

Wake up people!

[percy]

This post is in reply to Mouse's.
Support for AH is because he has earnt it.Life goes on,day follows night,and at sometime it may stop rainning!!! People die,babies born,TV needs replacing,car needs replacing,business opportunities.I note NZ balance of trade figures have improved so things do look to be improving.With SCF you can bet G Kerr's Torchlight is making money.There are allways people losing money while others are making money.I note on another thread someone was thinking of buying Goodman Fielder shares.Well I no longer buy their bread,I buy Copelands and I note Copelands shops are allways flat out.It use to take me 10 minutes to get accross town,now takes 20 minutes as twice as many cars on the road .Can you see RYM stopping building retirement homes?
Only reason your Dr.will stop practicing is because he has earnt too much and wants to spend more time at golf.Remember NZ has Water and food.Not ever country have those so the future is very bright if it would only stop rainning!!!!

[Enumerate]

So take early action to get to grips with SCF etc. The major difference to earlier finance company disasters is the simple fact its now also a Govt Disaster. A $2 billion Govt Disaster. We will see other finance companies in equal stress. Interest rates must go up and business must slow down even more than at present. What this will do to the share market is a bit confused at present.


Mouse, we have these little things in NZ called "rule by law" and "private property".

The Retail Deposit Guarantee Scheme was a feeble attempt, by government, to bolster confidence in the finance sector - by guaranteeing the deposits of retail investors in certain approved companies.

It is NOT a nationalisation of the finance sector.

It IS commercially stupid policy - that is not the fault of the finance sector.

It does NOT justify a significant over zealousness by public officials in enacting Statutory Management on Allan Hubbard and his wife.

[macduffy]

Enumerate's posts echo my own unease about the action against Aorangi and its owners.

percy's posts, well I'm afraid I don't get his point in relation to this issue but I eat Goodman Fielder's bread if that's relevant!

[percy]

Enumerate's posts echo my own unease about the action against Aorangi and its owners.

percy's posts, well I'm afraid I don't get his point in relation to this issue but I eat Goodman Fielder's bread if that's relevant!

Well I think what I meant was people's buying habits change.Because shoppers may not buy Goodman's bread it does not mean the market for a good bread maker is over.Rather that Copelands were doing well and if I was looking to buy a bread maker shares I would but theirs rather than Goodman.However as you are still buy Goodman bread all is not over for them!!
It is the same with Aussie banks looking to expand into Asia,they will leave a gap for a NZ bank.One finance company no longer financing cars or whatever leaves room for another.Life goes on and as mouse was painting a bleak out look I meant to offer a different point of view.I feel there is a good bright future for finance companies.I trust SCF is one of them.

[mouse]

.I feel there is a good bright future for finance companies.I trust SCF is one of them.
My problem,like Percy, is only seeing Rain. It has been raining in Christchurch for a week. We measure the rain in wheelbarrow loads full. Not so with Finance Companies. They seem to becoming as scarce as hens teeth. With $2 billion worth of loans to be negotiated away from SCF and into other finance companies or banks should SCF go under then the prospect of massive upheaval on the South Island becomes pretty threatening. I am sure that Pyne Gould will make a few dollars out of the disaster. But the dollar loss in the South Island will be substantial. I hope SCF survives. But I doubt it.

[Enumerate]

I feel there is a good bright future for finance companies.I trust SCF is one of them.


I think NZF is a company that will emerge, stronger, from the recession. Not only did they avoid all the mistakes of lending to over extended property developers, related party lending, etc. - but they seem innovative in terms of funding sources (bank dominant) and diversification into insurance.

I too hope SCF survives. I see a Smith's City situation in which they retreat to the core lending to agri-business in the South Island. I reckon that their heartland lenders will remain staunch. They will reduce the core lending business to under $1billion and begin to grow again.

Shrinking the business is actually an easier problem than growing it. NZF has shown that in the residential mortgage space there is room for loan syndication. SCF could do the same. This is an as yet untapped source of funds.

Torchlight will take the "bad bank", I believe ... Southbury will get Scales and Helicopters back. It is primarily a question of stabilising the good bank and then sorting out the other bits and pieces.

Remember, that the "wall of debt" is also assisted in terms of the "hill of loan maturities" - this is the key advantage of downsizing the "good bank". This is also a fact ignored by all the balance sheet boffins inhabiting the SFO and the NBR commentry blogspace. Remember, you can shrink the company with effective negative equity - better recoveries than IFRS accounting on the impaired assets will get you your equity back - it might even be enough to satisfy the new capital adequacy rules.

Despite the SFO blundering, I still firmly believe that SCF has room to maneuver.

[percy]

Enumerate.
What a great post.Makes the most sense to me than all the commentators remarks.Yes shrinking the business,returning to basics,will return it back into a strong finance company.
Still plenty of business opportunities in South Canterbury and North Otago.

[Enumerate]

Yes shrinking the business,returning to basics,will return it back into a strong finance company.
Still plenty of business opportunities in South Canterbury and North Otago.

Well, I do believe it was you who drew the analogy with Smith City. I thank you, very much, for that key observation!

(The situation for Smiths City was, in fact, much worse than SCF - the absolute golden lesson, as you point out, was to focus on stakeholder psychology - that is the lesson from Smiths City. When I see them marching in Timaru, I see the same strength that saved Smiths, that can save SCF.)

[winner69]

To do a 'Smiths' don't SCF have to go into receivership .... didn't it take the receiver many years to get it back on its 2 feet

I remember the PSIS going into Stat Management once .... they are still around

[minimoke]

The recent support for Allan Hubbard on Facebook, newspapers and the streets of Timaru makes me believe that there is strength in the SCF recovery that cannot be underestimated.

I bought some SCFHA, today. Paid a bit more for them than I like ...
You are a brave person - and we hope a wise one.


I note the clear capability of Sandy Maier in conducting the turnaround. I note the introduction of Helicopters and Scales into SCF addiing to the SCFHA security. However, it is this customer loyalty ... same as SCY ... that convinces me that the recovery probability is greater than 17%.

The loyalty of the populace of Timaru is to be applauded - great to see the town get behind one of its leading lights. It strikes me though that the supporters have been people who have borrowed from AH - what he needs now is people who are prepared to put capital into SCF art a faster rate than the borrowers want to extract it. But your rationale for buying may be right - if SCF needs, say $100m thats only $2,000 each person in South Canterbury has to stump up with to provide meaningful support to SCF. But are they prepared to put their money where there mouth is post Deposit Guarantee?

As for the Botherway conflict - just when I was beginning to gain some faith in our Regulators they throw that us. Quite clearly anyone with half a brain would tie AH to SCF so anything you do to AH will impact on SCF regardless.

[Lawso]

One of the things that bothers me most is the effect of this action on SCF's current 8% debenure offer. Apparenly this was getting a reasonably good response from investors until the bomb shell, which must surely have halted this much-needed inflow of funds and cast doubt on Sandy Maier and team's efforts to rebuild. Minister Simon Power said the action was being taken to among other things "protect investors". IMO this precipitate action has further endangered the interests of SCF's 300.000 or so iinvestors.

[CJ]

IMO this precipitate action has further endangered the interests of SCF's 300.000 or so iinvestors.yes but only those without the govt guarantee.

You could also argue that the actions were taken to not endanger the 4.5m taxpayers you are underwriting the Govt Guarantee.

[COLIN]

Enumerate: I haven't had much spare time to make any further considered contribution to this thread, but I am fully in agreement with the thrust of your posts. You are a very articulate writer, and I believe that you also should let the various Government functionaries have the "benefit" of the extremely valid points you have made. We need to make them answerable for their ill-considered actions. I will send you a Private Message as to what specific action I have taken.

Lawso: Yes, I agree. And its a great irony that, in purportedly seeking to "protect investors in Aorangi Securities", they have undoubtedly weakened the position of investors in the SCF 2010 bonds and the perpetual preference shares, amounting to $220 million in all - far greater than the amount that Aorangi investors have placed with that company, who will probably emerge unscathed.

How incredibly disingenuous, nay downright naive, of them to state that the announcements re placing Mr & Mrs Hubbard in Statutory Management, and setting the Serious Fraud alsatians onto them, "would not affect SCF!".

[winner69]

Hubbard prob is decent joker and has to be admired for his tireless work over the years and all that but you need to be have concerns about the whole Hubbard and connections / SCF saga even if there is only a semblence of truth in what Shoeshine wrote in the NBR last week - the story about how SCF took a guarantee over $25m of Northwind ( a Hubbard entity) assets in the days leading up to the govt guarantee extension which somehow helped that extension come about .... but then a while later the assets were shifted out of Northwind into another Hubbard trust. Shoeshine says that SCF would be lucky to see that $25m if the guarantee was called upon. Can't recall whether it is Northwind or the trust that is now in SM

I fear a lot more will come out of this whole saga

[minimoke]

I fear a lot more will come out of this whole saga
I'm not sure I understand how AH had the time to be handing out loans to the local plumber, working in his charities, doing good works as well as running a multi million $ corporation as well as untold other companies, trusts etc all at the same time. Something surely has to give - and perhaps it did.

[winner69]

There's a subscriber only pice on the NBR about SCF hocking off Dairy Holding s shareholding .... not the best times to do that I would have thought but then again times are desperate

I would guess that Hubbard has been a bit of a nuisance down at the SCF offices and can't see how desperate things are and prob has had a few decent heated discussions with Sandy ..... if so maybe the old geezer has lost it and SM is a way for sense to prevail going forward

[minimoke]

There's a subscriber only pice on the NBR about SCF hocking off Dairy Holding s shareholding
Hmmm. So what do Landcorp do? Put taxpayer interests into Crafar farms or now into Dairy Holdings? Or both? I think I'd sooner see their money go into Dairy Holdings - that way the tax payers get a double dip benefit. They get some decent farm assets (against Crafars which need a fair bit of work) and SCF gets some cash which may be enough to keep depositors calling of the Deposit Guarantee.

[Enumerate]

Selling Dairy Holdings is clearly activation of Plan 'B" in SCF. However, it is not a last ditch survival pitch - it is an abandonment of Hubbard's Plan 'A' - to keep all the equity assets, intact, for a potential return to Southbury.

From a pure SCF viewpoint, sale of Dairy Holdings would be a great development. It would materially help maintain at least 3 of the covenants in the Trust Deed associated with the latest prospectus. I may also help with the level of related party debt - there are no formal covenants on this.

Of course, alot depends on the structure of the deal. However, it clearly has the capability of significantly improving the SCF balance sheet.

I think that by the time we see the structural effect of introducing Scales, Helicopters; the sale of Dairy ... all the various Torchlight and Hubbard bridging loans ... it will be late August. By this stage, I think we will see a transaction or a series of transactions. New equity for the slimmed down SCF; sale of the "Bad Bank" assets to Torchlight and a clear disposition on the equity assets (it may now not be Southbury buying them back).

Hence, from an investment perspective, waiting for the release of the June accounts will likely mean that you will be too late to anticipate a potential bounce back in pref or bond prices. (Then again, you might just avoid a complete collapse of Bernard Hickeyan proportions; plumbing new depths of financial despair as yet only currently conceived by David Hillary - while this remains a possibility it is not, in my view, a likely outcome).

There are a number of divergent viewpoints on this. I will not attempt to summarise the full spectrum of prognosis ... My own view is that SCF will survive to be carved up along the lines that Sandy Maier has outlined. I think Hubbard will be diluted by a new equity partner, but will remain with a significant asset in a $1b SCF finance company. It is hard to dilute the SCFHA's - which is the prime reason I bought some - I also think it is difficult to force SCFHA holders to face an unacceptable revision in terms.

The SCFHAs offer the best return if the full recovery scenarios prove accurate. However, on the failure scenarios - they provide the worst return. SCF0x0's offer modest returns wtih varying levels of risk. There is something for everyone in SCF ... time to get your own appetite for risk/reward worked out ...

[Alex]

There is something for everyone in SCF ... time to get your own appetite for risk/reward worked out ...[/QUOTE]

And there's of course the 8% essentially risk-free return for the risk averse types...

[Enumerate]

There's a subscriber only pice on the NBR about SCF hocking off Dairy Holding s shareholding ....


The NBR article (or column) foreshadowing the sale of Dairy Holdings seems to have ... evaporated. Is it a case of Journos getting ahead of themselves?

Nothing appears in syndication ... hmmm ... strange.

[Enumerate]

I keep meaning to mention this ... have neglected to, so far, so will do so now:

In the Trust Deed for the SCFHAs is the option for the holder to take new preference shares in lieu of cash payment on the dividend. If push came to shove, I for one would be keen to forsake cash payment in favour of new prefs.

This might not seem terribly significant, in the scheme of things. However, there is another point to note. SCFHAs have their dividend issued fully imputed. You might get 5.6%, but it is tax paid. If the company lacks the imputation credits it must compensate for the lack of imputation, in cash.

Hence the effective payout on the SCFHAs might actually be a greater cash drain than you would have thought at first glace.

Save SCF by taking your SCFHA dividend in new pref shares!

[temuk]

No interest payments this month for Aorangi securities (Read about it in tomorrows paper)

Presumably because the freeze!

[minimoke]

No interest payments this month for Aorangi securities (Read about it in tomorrows paper)

Presumably because the freeze!
And another important day to today for AH. In his press statement re Aorangi he said: "In the past month I have been working on finding a solution to South Canterbury Finance affairs and hope to arrange an agreement with an overseas company, subject to confirmation by June 30 to inject a large amount of capital which would place South Canterbury Finance in a secure position for the future."

Will there be an announcement today?

[winner69]

No interest payments this month for Aorangi securities (Read about it in tomorrows paper)

Presumably because the freeze!

Probably ran out of money .... and no other cookie jars to raid this time

[COLIN]

And another important day to today for AH. In his press statement re Aorangi he said: "In the past month I have been working on finding a solution to South Canterbury Finance affairs and hope to arrange an agreement with an overseas company, subject to confirmation by June 30 to inject a large amount of capital which would place South Canterbury Finance in a secure position for the future."

Will there be an announcement today?
A bit hard to accomplish when you've been banned from having control of your own business affairs - and even your credit card and cheque book confiscated!

[Alan3285]

A bit hard to accomplish when you've been banned from having control of your own business affairs - and even your credit card and cheque book confiscated!

Absolutely - I would say that AH is now hamstrung in this respect, and won't be able to make an announcement (if he has done a deal).

Another reason why it is silly of those that are claiming the Stat Mgt of AH does not affect SCF.

Alan.

[minimoke]

A bit hard to accomplish when you've been banned from having control of your own business affairs - and even your credit card and cheque book confiscated!
I'm not sure the Stat Man would stop AH from working on / discussing a deal. I doubt that whatever party he was talking to would have been a one-on-one discussion. There would have been several people involved and one of them would have the credit card to pay for lunch.

Clearly he wouldn't be able to negotiate / sign off any recovery Capital Plan - but then he wouldn't have done that prior to the Stat Man anyway. If he hadn't been put under Stat Man I would have thought that he and SM would have done a joint press release - Sandy fronting it and AH in the background wearing the cloak of "President For Life". I don't think there is much to stop that from happening today if a deal could be done.

What is likely to happen though is that any potential Saviour will have been scared off by the Stat Man - and again the regulators ought to have known that was a risk to SCF when the Stat Man was decided. The alternative is that the Stat Man will, understandably, be a major distraction for AH which will delay his ability to be part of any discussions.

[winner69]

Almost right minimoke .... I think that AH was playing too hard and protecting his own personal interests rather than the interests of the whole empire ..... with the Stat Man now doing the deciding maybe any negotiations SCF were doing might have just become a bit easier .... but AH obviously won't be buying the drinks

[Capitalist]

Almost right minimoke .... I think that AH was playing too hard and protecting his own personal interests rather than the interests of the whole empire ..... with the Stat Man now doing the deciding maybe any negotiations SCF were doing might have just become a bit easier .... but AH obviously won't be buying the drinks

You are the only one who actually gets it, I think. No way would Diplock and co have acted on the word of one guy from Waimate. They would only act in this manner on the word of someone they trust. I think you know who that person was.

[Enumerate]

No way would Diplock and co have acted on the word of one guy from Waimate. They would only act in this manner on the word of someone they trust.


Welcome to fascist New Zealand.

Do you actually think Diplock is calling the shots?!?

[minimoke]

Welcome to fascist New Zealand.

Do you actually think Diplock is calling the shots?!?
Hmm - nearly time to invoke Godwins Law and get this thread closed down. But to be fair you could perhaps see if there is any analogy between AH southern Advocates and those pulling Diplocks strings.

[Enumerate]

Hmm - nearly time to invoke Godwins Law and get this thread closed down.


I believe I am making a valid point:

Fascists believe that a nation is an organic community that requires strong leadership, singular collective identity, and the will and ability to commit violence and wage war in order to keep the nation strong.

Allan Hubbard as inalienable property rights that have been usurped by the state. This is the second week of AH in Statutory Management and yet there is no word of justification for this singular and outrageous step. If it transpires that Statutory Management was invoked to take decision making capability away from Allan due to the state's interest in protecting itself from embarrassment due to the Retail Deposit Guarantee (as has been implied); this is, ipso facto, the actions of a fascist state.

If thugs had met Mr Hubbard, in the street and stole the VW ... there would be outrage. Just because the thugs turn up in suits, use the subtle violence of state regulation and promise to act "in the public interest" (whatever that means; and whenever it is, exactly, that they will tell us what it means) - there is no difference in the basic thuggery.

It is darkly appropriate that Adam Feeley, in his promotional picture for the SFO, is posting with a dark shadow cast across the SFO logo. Chilling.

Leave Allan Hubbard Alone!

[minimoke]

I believe I am making a valid point:

Fascists believe that a nation is an organic community that requires strong leadership, singular collective identity, and the will and ability to commit violence and wage war in order to keep the nation strong.

Allan Hubbard as inalienable property rights that have been usurped by the state. This is the second week of AH in Statutory Management and yet there is no word of justification for this singular and outrageous step. If it transpires that Statutory Management was invoked to take decision making capability away from Allan due to the state's interest in protecting itself from embarrassment due to the Retail Deposit Guarantee (as has been implied); this is, ipso facto, the actions of a fascist state.

If thugs had met Mr Hubbard, in the street and stole the VW ... there would be outrage. Just because the thugs turn up in suits, use the subtle violence of state regulation and promise to act "in the public interest" (whatever that means; and whenever it is, exactly, that they will tell us what it means) - there is no difference in the basic thuggery.

It is darkly appropriate that Adam Feeley, in his promotional picture for the SFO, is posting with a dark shadow cast across the SFO logo. Chilling.

Leave Allan Hubbard Alone!
An interesting perspective Enumerate.

If AH has inalienable property rights that would suggest we are in a libertarian society - which we aren't. We actually have very limited property rights - most of which are tied up in some law or other. There is also an argument that depositors into AH trusts also have property rights and the state has stepped in to protect them. If you want to discuss property rights we probably also should discuss fair dealing - which is "If I borrow money off you and I promise to put that money into a property mortgage then that is what I will do".

As I recall the State did have justification for the Stat Man and in an announcement from the Minister - it was stated in part as "The main objectives are to prevent fraud and reckless company management, to protect investors and to enable the orderly administration of a company's affairs."

Your "thuggery" analogy in the context of AH and Fascism is perhaps misplaced. It has been reported that a southern MP had her car door kicked and damaged by AH supporters. It is these supporters, like the proletariat who are rising up against capitalism. It is nearly like Southerners see themselves as a separate race who protest against the Wellington oppressors. Its as if AH, as the supreme leader, is superior and is free to sit outside the norms of recognised business practice. It is the SCF depositors who do not want individual rights - they want collectivism through the Deposit Guarantee. Their view is a New Order where business can be done on a handshake, money flowing through a maze of interparty lending in culture of frugality.

As for reading the tea leaves and interpreting a shadow falling across a flag I think SCF already had a very dark shadow falling over it pre Stat Man and that was of its making not Feely's. Standrd and Poors was already moving towards a full eclipse.

And I'll reiterate - I'm sure AH should be recognized for his achievements - but if there is a suspicion of wrong doing then he should be removed from his pedestal (even if temporarily) until the issues are worked out. I'd also say that the government has set a new threshold for intervention. I'm looking forward to Hotchin and Watson being placed in Stat Man while ALF works to protect their interests from the activities of these two men.

I am sure the State is trying to protect its (being the tax payer) interests in the Deposit Guarantee scheme - but this scheme relates to SCF, not AH's trusts. That the State invokes its powers on an individual which will undoubtedly impact on a corporation (SCF) stretches the logic you are trying to apply.

[Enumerate]

Miini, perhaps you can answer a very simple question: "What is the public interest that is being defended by AH Stat Mngment?".

Your first attempted answer is clearly insufficient. What fraud is being prevented? What reckless company management is being prevented? What protection is being afforded to investors in orderly administration?

Basic questions .... I would have thought that after one and a half weeks ... we would have an answer.

Instead, it seems as if you are satisfied by suspicion and innuendo. I, however, am not. Neither is our conventional system of justice which holds sway when Adam Feeley has stopped abusing his regulatory powers.

Allan Hubbard's investors in Aorangi have the same property rights as Allan. Both parties have sufficient remedies in the conventional justice system for any dispute. What is the problem here - an investor didn't get a prospectus when he invested? Do you seriously believe that Statutory Management is the solution to this problem?

Your point about MP's getting their doors kicked is irrelevant. People who support Allan Hubbard do so for a range of reasons. My concerns are with fundamental principles of justice. I am sure the MPs will get a kicking of the electoral kind if they don't pay enough attention to this issue.



It is the SCF depositors who do not want individual rights - they want collectivism through the Deposit Guarantee


So here it is ... the essence of your argument.

The Retail Deposit Guarantee is collectivist nonsense at it's worst. It was, and is, bad commercial policy. Is has always been unsound to expect the tax payer to guarantee the security of people who have entered into commercial arrangements of their own free will.

If property rights are an aspect of liberty, Benjamin Franklin said it best:

"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."

Mini, it seems you have given up; I have not.

[minimoke]

Miini, perhaps you can answer a very simple question: "What is the public interest that is being defended by AH Stat Mngment?".
...
Mini, it seems you have given up; I have not.
I'm afraid I can't answer your question. I am not privy to the workings of AH's trusts, nor to the complaints made against him, nor the information presented to the regulators that encouraged them to move in the manner they did. Nor do I know nor understand how information on this matter was likely to be passing through the regulators hands around the same time they approved the Deposit Guarantee extension. Nor do I understand how it is that Southerners get special protections (the Stat Man / Deposit Guarantee) when ALF investors get laid over a barrel with their pants down and the Govt doesn't step in.

In a fascist country I suspect the oppressors would move quickly against a wrongdoer - perhaps dragged out the door never to be seen again. Fortunately here in NZ our wheels of justice turn somewhat slower. Just look to see how long it took for charges to be brought against Petrecivic this week - when did he buy that launch?

Rest assured I haven't given up. However I'm trying to keep the personality separate from the issue. Why regulators moved against AH personally - I don't know the full picture. I am confident (though accept that confidence may be misguided) that they would not have moved given the ripples such action would undoubtedly cause unless there was a very good reason/s to do so.

If it is found they didn't have good reasons then as investors we're all ****ed!

[winner69]

Welcome to fascist New Zealand.

Do you actually think Diplock is calling the shots?!?

Maybe, just maybe, the shots aren't even being called from NZ .....

[westerly]

Great discussion between minimoke and Enumerate

One thing that seems to be forgotten with the Govt. guarantee is it originated with the GFC and was introduced to maintain confidence in the banks and extended at the same time to include finance coy's
etc. In Sept 09 the Govt. was up $85m with fees above what they had paid out.
SCF has supposedly $2b in assets so any Govt. loss would probably be minimal. The Receiver if SCF failed would be working for the Govt. so Torchlights prior charge would be settled in cash and they would have to bid for assets in competion on the open market. The big losers would be those who have borrowed from SCF as the would be forced to look for alternative finance. Marac may gain in that situation.
As a Cantabrian I sometimes think we would be better off if we did renounce the North Island

Westerly

[Pumice]

I can’t figure it out.
Is AH guilty until proven innocent.... or
Innocent until proven guilty.

[Enumerate]

While we wait for the SFO to do the business on Allan Hubbard, I wonder if we should idle the time by speculating what they will find.

I'll start things going ...

I bet they will find that Allan Hubbard has been hiding Lord Lucan in the basement of his house in Timaru ...

[Enumerate]

I can't figure it out.
Is AH guilty until proven innocent.... or
Innocent until proven guilty.

Nice.

It seems, more rather, that he is guilty until proven guilty.

[minimoke]

While we wait for the SFO to do the business on Allan Hubbard, I wonder if we should idle the time by speculating what they will find.

I'll start things going ...

I bet they will find that Allan Hubbard has been hiding Lord Lucan in the basement of his house in Timaru ...
I'll bet theres an Area 48 in one of his back paddocks which is holding the aliens that were spotted off the Kaikoura coast - you know who is funding Waihopai now don't you!!

On another note - who was it that got the SCFHA's at 10c on opening yesterday - then bumped back to 15c before closing which coincides with SCF's end of financial year?

[Enumerate]

On another note - who was it that got the SCFHA's at 10c on opening yesterday - then bumped back to 15c before closing which coincides with SCF's end of financial year?

I'll confess to taking out the parcel at 15cents.

Luck bugger who picked them up at 10cents! Amazing. It must have been Bernard Hickey selling down from his SuperFund.

[minimoke]

Luck bugger who picked them up at 10cents! Amazing.
Alls not lost - another wee parcel through today at 10c. You'll need a fast finger by that BUY button.

[Enumerate]

Wow - someone just dumped 400k SCFHA into the bid side. If you dump these at 10cents you clearly believe that receivership is an inevitability.

Maier and the board have until 31st August to capitalise SCF. This is the first "hard" deadline. It will either happen (and will deal to the "wall of maturities") or it won't.

I think we are in for a bit of a roller coaster ride over the next few months. There may be some happier news - but there will also be darker days ahead.

[minimoke]

Maier and the board have until 31st August to capitalise SCF. This is the first "hard" deadline. It will either happen (and will deal to the "wall of maturities") or it won't.

Though yesterday was a "soft" deadline - no announcement. Now I know AH will have had his mind on other things but if SCF had someone in the wings ready for a 30 June announcement then that deadline has gone. AH has given the market a commitment to make an announcement - I would have thought that SCF should update the market on those negotiations so why the silence?

[Enumerate]

AH lost all ability to negotiate or to announce once the Statutory Management took effect. At that point any 30 June "soft" deadline evaporated.

Thinking about it, maybe that was what the 400k holder was waiting for? No announcement - dump at any price.

[minimoke]

In todays news Sandy Maier is saying SCF has been battered by the AH Stat Man. Seems SCF can continue to pay maturing investment's "for now". Reinvestment take ups have slowed and South Islanders are being urged to put their money with SCF - if the money doesn't come in SCF won't survive.

In the meantime SCF survives solely with the support of the Ext Dep Guarantee - with their rates significantly higher than competitors. SCF is at 8% while
- Equitable = 5.7% / 5.9%
- F & P 6.75% or 7.25
- Marac 6% / 4%
- PGG 5.95% - 6.45

If you had cash why would you not be flocking to SCF - probably because punters realise that the significantly extra interest isn't worth the risk of having their deposits tied up for who knows how long in the event of the Dep Guarantee kicking in.

[Marilyn Munroe]

Uhoh!

'Investigation hits new investments'

http://www.stuff.co.nz/timaru-herald/news/3877188/Investigation-hits-new-investments


Boop boop de do

Marilyn

[Snapper]

"If you had cash why would you not be flocking to SCF - probably because punters realise that the significantly extra interest isn't worth the risk of having their deposits tied up for who knows how long in the event of the Dep Guarantee kicking in."


Look at it this way - punters are getting a 2-3% premium for having some uncertainty about the exact timing of the return of their funds, not too bad really.

[minimoke]

Look at it this way - punters are getting a 2-3% premium for having some uncertainty about the exact timing of the return of their funds, not too bad really.
I'm not so sure if the premium is worth it if you are a Mom and Pop investor or some retiree. These people need to know where their income is coming from - they may not have extra cash to support their life styles while they wait for a Guarantee scheme to return all their cash or all the paper work which is bound to be needed if a call on the Guarantee is made.

In the meantime if they do give their cash to SCF they may be just propping something up which can't be propped up after the guarantee runs out. If they are being asked to support a finance company perhaps they might do society a bigger favour by putting their money into a company that has more certainty of a long life. The loss of cash flowing into these "better" finance companies may be exposing them to undue and needless stress

[Alan3285]

... punters realise that the significantly extra interest isn't worth the risk of having their deposits tied up for who knows how long in the event of the Dep Guarantee kicking in.

Don't we all know exactly how long?

Govt Guarantee - Clause 2.2 - Payment within 14 days (http://www.treasury.govt.nz/economy/guarantee/pdfs/dg-n-scant-rdeed.pdf)


Alan.

[Enumerate]

I wonder, with the new Fonterra trading rules coming up, if Dairy Holdings Ltd could settle some of it's debt in terms of a sale of Fonterra shares? Anyone know the details here?

[minimoke]

Don't we all know exactly how long?

Govt Guarantee - Clause 2.2 - Payment within 14 days (http://www.treasury.govt.nz/economy/guarantee/pdfs/dg-n-scant-rdeed.pdf)

Alan.
I hope we don't need to find out but but Treasury say, in their Q&A section at 2.6 "There is no fixed period for repayment, but payment to eligible creditors will be made as soon as practicable once we receive a correctly completed notice of claim and have assessed your eligibility and the proper amount to pay."

No doubt the solicitors will have fun working out what "14 days" means and what "indebtedness" means.

What say a default event occurs on 30 December - a day before the quarterly interest is due to be paid. Investors won't get interest indebtedness for that quarter (because the extended guarantee doesn't cover interest), and say your deposit indebtedness wasn't due to be paid until 31 December 2011 when do you think you will get paid?

Remember Vision Securities. They went bung on 1 April, Here is what treasury are saying to depositors today:

The Treasury has started to repay eligible Vision Securities depositors. Key steps in the process are:

Letters have been sent to all depositors to confirm their contact details and the type of claim form required.
If you are a Vision Securities Depositor and have not yet received a letter from the Treasury, please phone the Vision Securities Claims Helpline on 0800 650 034.
Following confirmation of details, the Treasury sends the appropriate claim form directly to depositors to complete and return. Claim forms have been sent to approximately 70% of eligible Vision Securities depositors.
Claim forms sent back to Treasury are assessed.
Please note that Treasury can't pay you if the form is not correctly completed, for example, if:
Information is missing from the forms.
Required questions are not answered.
Certified copies of required documents are not provided.
Following receipt of properly completed claim forms, Treasury assesses the claims and makes payment to eligible depositors.
The Treasury has started making payments to eligible Vision Securities depositors.
If the form is not correctly completed, Treasury will send the forms back to you again for you complete properly.
If this happens, you may need to have another statutory declaration made and, inevitably, processing of your claim for repayment will be significantly delayed.

[winner69]

Holy **** .... what a pain if everybody needs to make a 'statutory declaration' .... does that mean going to a JP or something?

If SCF go broke this could oslve the unemployment problem ... would need heaps of new people to get all the paper collected

But then 14 days is not too long to wait

[winner69]

As minimoke says Treasury seems to work to a different timeline - this from a media announcement re Vision .... Eligible depositors with Vision Securities will be contacted within six weeks and provided with information about how to claim under the terms of the Crown retail deposit guarantee.

http://www.treasury.govt.nz/publications/media-speeches/media/01apr10a

But maybe SCF do have separate rules because they are so big and a vital cog in the economic wellbeing of so many

[winner69]

See you would need to provide certified copies of passports and all that sort of stuff ..... anybody actually gone through the claims process for real yet?

[minimoke]

H
But then 14 days is not too long to wait
If SCF have 30,000 depositors and there are 150 JP's in Timaru - thats 200 Statutory Declarations each. At 5 minutes a pop thats 16 hours each or working two full time days. Take three days for the mail (those Cobb and Co horses take a while) you're down to 9 days for Treasury to get your money to you. Thats 70 extra people Treasury will need. If you see a flurry of activity at the AWF office in Wellington you'll know somethings afoot!

[POSSUM THE CAT]

Maybe they would be better to nationalize SCF Now and be done with it.

[minimoke]

So heres an example of some of the troubles. Mercer Group is in the poo. They had $11.4 in borrowings due over 12 months and breached their banking covenant. They owe SCF some $1.4m but that debt has now been taken over by Humphrey Rollestons Gresham Finance.

Trouble is AH is the major shareholder in Mercer so he presumably can't help bail them out at the moment. Luckily, perhaps Rangitata Plains Farms is also a substantial holder in Mercer - except AH own RPF. Or what about Jones Macky Limted shareholding - nope: also owned by AH. James Urquart may help Mercer - except he's already taken a bath on EHF

[Enumerate]

So heres an example of some of the troubles.


I agree.

With SCF in trouble, there is one problem to be sorted.

With SCF in liquidation, there will be a regions worth of trouble to be sorted.

[winner69]

Haven't heard much about Sam Kelt lately except Kelt Capital pulling is sponsorship of one of NZ;s richest races

Bet a lot to be untangled in that web as well

[Enumerate]

Haven't heard much about Sam Kelt lately except Kelt Capital pulling is sponsorship of one of NZ;s richest races
l

On the 18th of June the SCF 75% interest in Kelt Finance was sold to interests of the Kelt family.

[percy]

So heres an example of some of the troubles. Mercer Group is in the poo. They had $11.4 in borrowings due over 12 months and breached their banking covenant. They owe SCF some $1.4m but that debt has now been taken over by Humphrey Rollestons Gresham Finance.

Trouble is AH is the major shareholder in Mercer so he presumably can't help bail them out at the moment. Luckily, perhaps Rangitata Plains Farms is also a substantial holder in Mercer - except AH own RPF. Or what about Jones Macky Limted shareholding - nope: also owned by AH. James Urquart may help Mercer - except he's already taken a bath on EHF

Ian Urquhart may have taken a bath with EHF but it would be pocket money to him.Love to see him on the board with Rolleston.Rolleston in his tailor made suit, and Urquhart in his opp shop cast offs.

[Alan3285]

As minimoke says Treasury seems to work to a different timeline - this from a media announcement re Vision .... Eligible depositors with Vision Securities will be contacted within six weeks and provided with information about how to claim under the terms of the Crown retail deposit guarantee.

http://www.treasury.govt.nz/publications/media-speeches/media/01apr10a

But maybe SCF do have separate rules because they are so big and a vital cog in the economic wellbeing of so many

There is an article in the Herald today that seems to imply that, whilst the first ones took longer, the process has improved and gotten faster but depends on the quality of paperwork (fair enough I suppose):

NZ Herald - 5 Jul 2010 (http://www.nzherald.co.nz/news/print.cfm?objectid=10656520)

"The first group of Vision Securities investors, which were told the company had failed on April 1 this year, received payment on Friday"

So currently about 13 weeks by the sounds of it.


Alan.

[minimoke]

...the process has improved and gotten faster but depends on the quality of paperwork (fair enough I suppose):

"The first group of Vision Securities investors, which were told the company had failed on April 1 this year, received payment on Friday"

So currently about 13 weeks by the sounds of it.

Alan.
Though there were only 953 debenture holders who were owed $30m. Aren't there something like 30,000 depositors with SCF?

[Alan3285]

Though there were only 953 debenture holders who were owed $30m. Aren't there something like 30,000 depositors with SCF?

Yes, you are right - so likely the documentation and processes in place at SCF are that much better, but I wouldn't bank on getting paid out any quicker.

Alan.

[Snapper]

As long as they're not desperate for the cash, having funds still earning good interest and covered by the guarantee doesn't sound too bad to me.

[minimoke]

....so likely the documentation and processes in place at SCF are that much better.......
Alan.
Weren't people saying recently that AH did business on trust and a handshake. If that was his way of doing business I'm not so sure SCF would have significantly better systems than Vision. Sure they would have to be relatively robust but with the prospect of shelling out $1.3b I'd imagine Treasury will be looking pretty closely at all the papers flowing across their desk - and that won't be a fast process. 14 days just isn't going to happen - so best SCF doesn't' go under to test assertion.

[Dubdee]

The fact is that the GG only applies to interest earned up until the date of default. From then until repayment by the Crown you are out of luck with further interest. So it looks like you take an opportunity cost of 3 months interest but at least you get G risk at a decent yield.

[Alan3285]

As long as they're not desperate for the cash, having funds still earning good interest and covered by the guarantee doesn't sound too bad to me.

Indeed - I don't have spare cash right now (I'm fully invested in listed stuff), but if I did, it woudn't worry me one bit if I had to wait three months to get my guaranteed pay-out.

Most investors have rolling maturities anyway, so liquidity isn't a major issue, and if you puit those across two or three banks / guaranteed finance companies, you wouldn't have too much to worry about in general.

Alan.

[Alan3285]

The fact is that the GG only applies to interest earned up until the date of default. From then until repayment by the Crown you are out of luck with further interest. So it looks like you take an opportunity cost of 3 months interest but at least you get G risk at a decent yield.

So, if you lost three months opportunity, and had your money in for 12 months prior, you'd get 8% over 15 months, which is about 6.4%pa.

Doesn't sound too bad to me if you want rock solid security of the GG.

Alan.