South Canterbury Finance Limited [Archive] - Page 5

Enumerate

06-07-2010, 09:00 AM

There is so much mischievous nonsense being put about concerning SCF.

The simple facts are:

1) Sandy Maier took the CEO position last year. Like any good CEO he went through the cupboards and dragged out all the skeletons. SCF declared a $200million loss for the year end Dec 2009. This loss was predominantly due to loan impairments. Unlike Hanover - I believe this figure. The SCF loan book is of better quality than Hanover, for example; there is the application of IFRS accounting rules, which are more stringent; and, there is the new CEO wanting to get all the bad news out, on the table, to begin the recovery.

2) Due to this loss - SCF was in breach of it's Trust Deed. (If you are not aware of the debenture covenants - and they are extensive - you don't know anything about SCF). Three things happened ... Allan Hubbard introduced two new equity assets ... Torchlight introduced a bridiging loan senior to all other debt ... and the Trustee agreed to delay full enforcement of the Trust Deed, via waiver, until 31 August. The new equity healed most of the breach.

3) SCF is now in a period of structural change. The business has been partitioned into 3 parts - the "Good Bank" - a fine $1billion finance business; the "Bad Bank" - impaired and non strategic loans - the "Equity" portfolio. Both the "Bad Bank" and the "Equity" portfolio are non strategic to SCF.

THE "STEADY STATE" ISSUE FACING SCF IS WHERE IS THE NEW EQUITY, FOR THE "GOOD BANK" FINANCE OPERATIONS COMING FROM?

The magnitude of the requirement is that a $1billion dollar finance company could be run with equity of $100m. (The actual SCF covenant is debt <= 12 x equity).

A) SCF could sell the "Bad Bank" loan book. While this will happen, the old Benjamin Franklin saying "Necessity makes a bad bargain" is true - the margin is likely to be too thin.

B) SCF could sell selected assets in the "Equity" portfolio. This will happen ... Allan Hubbard was hoping it was to be back to Southbury ... that is "Plan A". "Plan B" is to sell them to wider interests. Sale of this portfolio would save SCF - it would repair the outstanding Trust Deed issues.

C) SCF could find a new equity partner. $200million, tops .... the only issue is what kind of deal (and dilution) would Allan Hubbard take (or the Statutory Manager, de facto)?

THE THREAT TO SCF COMES FROM THE "DYNAMICS" OF DEBT MATURITY vs LOAN MATURITY

The key issue facing SCF is cash flow planning. The "wall of debt" provides CASH FLOW challenges (NOT as everyone implies BALANCE SHEET challenges). If your debt is due in a couple of months and yet debts owed to you, to cover your debt, are spread over a year - you have a problem if you cannot "roll" you debt.

Bridging finance and spreading the maturities of new debt will solve this issue. SCF should not fail because of this issue - that would be completely tragic - because a viable business would be destroyed. Remember, the "wall of debt" is balanced by the "hill of maturities" ... the combination of downsizing the business and the structural changes outlined above will see SCF into calmer waters.

The business is getting smaller, we all know this. A finance business needs to borrow in order to lend. If SCF can borrow $1billion - it can lend $1billion; if it can borrow $500m it can lend $500m. So the issue is - how much can SCF raise, in the current market ... that is the "steady state" size of the business. Clearly, the higher amount it can borrow simplifies the cash planning challenges of the "wall of debt".

SCF IS A VIABLE BUSINESS

This is why the arrant nonsense spouted by ego maniac, self appointed, "industry commentators" is tragic. The orderly reduction of SCF to a $1billion business is easier than a paniced reduction to a $500m business.

Shouting "Fire" in a crowded picture theatre causes damage and harm, as people rush for the door; if there is, in fact, no fire - this act is more than dangerous, it is criminal.

Final point. An intelligent commentary on SCF should focus on the Trustee. If you do not understand the Trust Deed covenants, what the Trustee has done, in terms of waivers, deadlines and monitoring; you do not understand anything about SCF. The Trustee has behaved responsibly - if there was a serious balance sheet issue - the Trustee would act to defend the position of the debenture holders.

There, more facts and balance than anything Bernard Hickey is capable of. I do grow tired and sickened by his "headline grabbing" sensationalism.

SCF is viable ... lets not make Maier's job more difficult than it already is by imagining SCF is insolvent or fraudulent ... it is simply facing cash planning issues in the face of business restructure and downsize. These difficulties present significant risks ... but the most likely outcome is a full recovery - to the downsized state.

Alan3285

06-07-2010, 09:22 AM

Excellent summary Enumerate - Well done.

Alan.

mouse

06-07-2010, 09:48 AM

Excellent summary Enumerate - Well done.

Alan.
Yes, but would you put your cash into SCF?

Enumerate

06-07-2010, 10:02 AM

Yes, but would you put your cash into SCF?

Yes, I have.

The SCF010s were attractive, because of the partial guarantee and the high yield - 30%. I decided against this.

Investing SCF020/SCF030 with 12% yields, full guarantee, and the ability to roll them on maturity to "help out", is attractive. I decided against this.

Investing in new debentures at 8.25% with full guarantee, is attractive, and "helps out" with new money. I decided against this.

The SCFHA's are an insane yield - but are the highest risk due to deep subordination of the debt and lack of guarantee.

I went for the SCFHA ... because I have spent the last month extrapolating the SCF balance sheet from Dec '09 to current, incorporating the likely structural outomes, estimating the effect on the balance sheet ... I have been following up changes to SCF subsidiaries on Comapnies Office filings to understand what structural changes are happening in the background ... I have been analysing the debenture prospectus and the various Trust Deeds to understand the senior debt ... I have been following every scrap of publicly released news including following the various commentators.

In short, I put myself into an acceptably risky position with the expectation of the greatest return based on being as fully informed as I can possibly be.

Dubdee

06-07-2010, 10:07 AM

Enumerate,

an excellent piece of analysis.

One thing that should be mentioned is that both SCF's own auditor and that of the Crown (Korda mentha) have been looking at SCFs assets with a fine tooth comb. Probalby the impairments are very conservatively cast, but to protect themselves the SCF directors will be taking a most conservative line. Remember thay are personally liable for misstatements in the prospectus and that they are now not shareholders of SCF, so there is little upside for them taking a liberal line.

minimoke

06-07-2010, 10:42 AM

Yes, a great summary Enumerate and I agree SCF is viable - except there remains a great deal of challenge and uncertainty which should not be understated. That risk can be measured in some part but as has been previously mentioned there is probably something in SCF's offerings to suit different appetites for risk.

I agree with your Simple Facts but we should perhaps not be too simplistic
1) The SCF loan book is no doubt better than Hanovers - but there is still the issue on related party lending which I'm not entirely sure we have seen the last of.
2) Torchlight has introduced new funds - and part of that is $20m from AH - which makes it a third injection by him.
3) While undergoing structural change SCF has a Standard and Poors Albatross of a C short term rating which puts it in a Substantial Risk / Extremely Speculative grade or a B- long term which is still highly speculative.

Your "Steady State" summary contains lots of "could's" - all rational, but the sooner the coulds turn into "dids' the better.

Your "Viable Business" provides an interesting analogy.
Shouting "fire" where it is clear there is no fire is surely irresponsible - but perhaps there is enough of a whiff of smoke that a precautionary approach is the most pragmatic. We've seen from the weekend that you don't even need smoke to end up with dead bodies lying around a picture theatre. Conversely shouting "all is well" when it is not, is also irresponsible - and that is where SCF separates itself from the Hanovers - we haven't had that kind of misleading message presented by celebrities: though perhaps some of the AH adorees are getting a bit close to that position.

I'm not sure anyone here is suggesting SCF is insolvent or fraudulent. On balance, based on cash flow, I'd say the scales are tipping towards drawing on the Govt Deposit Guarantee being called on. SCF need more facts and "dids" (like "we did secure $200m in equity") to get them tipping back in the right direction.

But in the meantime there is something there for those with an appetite for risk.

COLIN

06-07-2010, 11:12 AM

Excellent summary Enumerate - Well done.

Alan.

Excellent presentation, Enumerate, just excellent.
Without the H-bomb of the Statutory Management of the Hubbards and the SFO scud missile attack on them I firmly believe that the SCF situation could have been successfully managed back to health and happiness. Now we have the potentially disastrous effects of collateral damage to the whole SCF business, by way of a likely serious falling-away of debenture inflows and rollovers, that even Sandy Maier seems to be acknowledging as a "given".
I had been steadily accumulating the SCF010's, as well as the SCFHA's, at recent high yields, but have now sold back most of the SCF010's, at a small loss. However, like you, I decided to stick with the SCFHA's, given that there is little to be derived from selling them now, and a great deal to be gained from a possible eventual restructure of sorts.

Enumerate

06-07-2010, 11:27 AM

Mini, thanks for your in depth comments ...

1) The SCF loan book is no doubt better than Hanovers - but there is still the issue on related party lending which I'm not entirely sure we have seen the last of.

I get the sense from reviewing Companies Office filings that alot is happening on the related party front. The Kelt Finance and Mercer changes are an example of this. It should be noted that there are no Trust Deed covenants on the level of related party debt, per se.

2) Torchlight has introduced new funds - and part of that is $20m from AH - which makes it a third injection by him.

I note that Torchlight have raised $150m (up to $170m). Torchlight could buy SCF - or they could take out the equity assets and the "Bad Bank". Related party or not - SCF needs all the "white knights" it can get.

3) While undergoing structural change SCF has a Standard and Poors Albatross of a C short term rating which puts it in a Substantial Risk / Extremely Speculative grade or a B- long term which is still highly speculative.

NZF has a B rating for short and long term debt. They managed to package up $100m of AAA rated RMBS - that were sold into the institutions. B- long and C short, in SCF, reflects the cash planning issues with the "Wall of Debt" and the overall negative outlook S&P has on the NZ finance sector. Do not interpret the S&P rating that the SCF loan book is in any way a toxic mess. My basic belief is that the loan book is solid ... the dynamics of the SCF business are the issue. SCF needs more primary equity, less equity assets and to be rid of the property sector loans. All this is happening ... as far as I can see.

Your "Steady State" summary contains lots of "could's" - all rational, but the sooner the coulds turn into "dids' the better.

Once the "coulds" turn into "dids" - you will no longer be able to buy SCFHAs at 10cents per unit.

Your "Viable Business" provides an interesting analogy.
Shouting "fire" where it is clear there is no fire is surely irresponsible - but perhaps there is enough of a whiff of smoke that a precautionary approach is the most pragmatic. We've seen from the weekend that you don't even need smoke to end up with dead bodies lying around a picture theatre. Conversely shouting "all is well" when it is not, is also irresponsible - and that is where SCF separates itself from the Hanovers - we haven't had that kind of misleading message presented by celebrities: though perhaps some of the AH adorees are getting a bit close to that position.

I'm not sure anyone here is suggesting SCF is insolvent or fraudulent. On balance, based on cash flow, I'd say the scales are tipping towards drawing on the Govt Deposit Guarantee being called on. SCF need more facts and "dids" (like "we did secure $200m in equity") to get them tipping back in the right direction.

But in the meantime there is something there for those with an appetite for risk.

Fair enough call. I have a different view.

The only response I would like to make is that the only entity capable of shouting "Fire" is the Trustee. Only the Trustee has the full facts, provided on a daily basis, in some cases. The Trust Deed is very good, in terms of defining the debenture holder position. Trustees will only act to enforce the terms of the Trust Deed - this Trustee has accepted some temporary waivers to the covenants ... has set a deadline for full compliance ... and is NOT shouting "Fire" like some uniformed commentators.

I draw confidence from this and my own research that the SCF balance sheet is sound, in the present situation; will get better with further structural change.

The key risk is the dynamics of the debt rollover (the cash management issue). This could kill SCF - but if it does, this would be the tragic loss of a viable business.

Enumerate

06-07-2010, 11:36 AM

Without the H-bomb of the Statutory Management of the Hubbards and the SFO scud missile attack on them I firmly believe that the SCF situation could have been successfully managed back to health and happiness. Now we have the potentially disastrous effects of collateral damage to the whole SCF business, by way of a likely serious falling-away of debenture inflows and rollovers, that even Sandy Maier seems to be acknowledging as a "given".

If downsizing to a $1billion business is tough ... downsizing to a $500million business is more than twice as difficult. There comes a point at which it is impossible. This remains a clear risk ... akin to a "run on the bank".

I decided to stick with the SCFHA's, given that there is little to be derived from selling them now, and a great deal to be gained from a possible eventual restructure of sorts.

If SCF survives, there is alot to like about the SCFHAs. The fully imputed dividend and the 2.5% margin above the bank bill rate makes them very tasty. As a long term investment ... they are either worth the $1 ... or they are worth nothing. Mine are now in the bottom drawer - awaiting the judgment of the Gods of finance.

minimoke

06-07-2010, 11:47 AM

The only response I would like to make is that the only entity capable of shouting "Fire" is the Trustee.
I think your "fire" analogy works - except the shout has already been made. It probably was made first by the Govt when they introduced the Deposit Guarantee. "Theres a fire on the horizon and we will make sure we have enough appliances to protect your assets". S&P have also shouted "Fire" - but they have probably been successful in squeezing out the oxygen needed by fire as well as life. AH has shouted fire and bought in the helicopter crews. and SM has shouted fire and is pleading for more cash. The Regulators sure have shouted "fire" - except that was the neighabours building and their emergency response appears to have been to (inadvertently) lob the flaming fuel next door. The message we'll get from the Trustees, in this analogy will be "Run!, the building falling down". If this happens the survivors will be the ones who didn't get too close to the heat.

percy

06-07-2010, 01:47 PM

Enumerate and Minimoke.
May I say how much I enjoy your well thought out informed posts.
The magnitude of the requirement is that a $1billion dollar finance company could be run with equity of $100mil,you wrote Enumerate.I think the commentators do not understand this.
From the PGC exercise ie capital raising it was shareholder capital lost.The speed at which Torchlight raised $150 mil surprised me,then Marac paying cash of $70 mil for GMAC.
My point is that $220 mil At PGC makes SCF requiring capital look not so hard.
Shareholders led by Kerr saw Marac as a good finance company once the proprty loans were accounted for.SCF is the same.

Enumerate

06-07-2010, 03:38 PM

Shareholders led by Kerr saw Marac as a good finance company once the proprty loans were accounted for.SCF is the same.

The Marac of old was an commercial/industrial financier, I believe. SCF is to agribusiness what Marac was to commercial/industrial. Both are specialist forms of lending and require much more commercial savvy than is present in the trading banks.

I'd say that if PGC had to choose between Marac and SCF ... they would choose SCF!

percy

06-07-2010, 03:50 PM

.

I'd say that if PGC had to choose between Marac and SCF ... they would choose SCF![/QUOTE]

Yes.That's a thought.!!!PGC shareholders love divies,where they come from they do not mind.A few years ago I was at a PGC AGM when then chairman Sir Miles Warren announced that the divie was being increased.Greeted with hurrah,hurrah from the shareholders.I thought someone would lead three cheers for the chairman!!!!Yes SCF is more of a fit with PGC when you really think about it.

mouse

06-07-2010, 04:59 PM

percy

06-07-2010, 05:17 PM

Many posts about SCF. Mine was, 'would you lend SCF cash in the present situation?' Since that is what is required, cash, and long term it is required without a Government Guarantee. The next danger, and it is just as serious, is 'would you borrow cash from SCF?' The danger of borrowing from SCF is you might have to repay it at short notice and in a bad financial market. The business of SCF is to borrow cash in and lend money out. Both are very difficult until everything is cleared up and SCF has a clean bill of health. I would neither lend to nor borrow from SCF at the present time.
It is perfectly OK to take a punt for excellent gains. Would you do it for 8%?
That is the question for the market.
Would sharebrokers, or sharemongers, recommend investing in SCF deposits?
Some time ago Marac lost shareholders capital.Shareholders put in fresh capital.Brand intact.A long time ago Westpac looked to be in trouble and looked as though Kerry Packer would take it over.went to shareholders for more capital.Brand intact.American Express looked to be in terminal trouble.Warren Buffett saw AE cardholders were still using the card.Brand intact,Buffett brought large shareholding and made huge amount of money.
What is needed inSCF is new capital.This will restore the brand very quickly.Very,very quickly if the new capital or new shareholding is also a known name or brand.Until that time there is uncertainity,so would be hard for adviser to recommend them in my opinon.
I still find it surprising how much money Kerr has raised with Torchlight and PGC and how Marac paid $70mil cash for GMAC.Seems to me there is plenty of money around so long as there are good rewards.

Enumerate

06-07-2010, 05:40 PM

I am not recommending anything to anyone ... but as a hypothetical case:

Would sharebrokers, or sharemongers, recommend investing in SCF deposits?

If I had $100,000 capital ... and needed 5% before tax to live on ... that is $5,000 per year, at the bank, at best.

This is what I might do as an alternative:

I'd put $90,000 into SCF020 (due 15/6/2011) at 11.5% - that gives me $10,350 per year.

I'd put $5,000 in the bank, on call, at 4% - that gives me $200 per year.

I'd put $5,000 into SCFHA at 13cents each - about 38,500 scfha at 5.71%. or about $2,198 per year

Analysis:

If it turns to custard ... I could lose up to 1 quarter's interest from my SCF020s and all my SCFHA capital ... I simply cash in my on call money to cover off my income needs .... I get my $5,000 to spend (the on call money) get an extra $10,350 +$200 in interest pro rated and my $90,000 guaranteed capital back. Basically, I'm fine - on average, slightly better off than money in the bank.

If it goes well ... I make out like a bandit. I get my interest of $10,350 plus on call interest of $200 plus $2,198 from the SCFHA. I exceed the $5,000 I was going to get from a bank by a wide margin and have made a tax free capital gain on my SCFHA asset that now has a capital value of $38,500. I now have capital of $133,500 and income approaching 3 x what the bank was paying. Tasty!

minimoke

06-07-2010, 05:42 PM

Would sharebrokers, or sharemongers, recommend investing in SCF deposits?
I don't see how a Financial Advisor could point clients to SCF at the moment. The risks are not well enough known nor are the results if those risks come home to roost. The risk for Advisors is they don't know how long it would take for a client to get their money back if things go bad - nor can they guarantee the interest payable. And there are better alternatives for those who would seek financial advice. Though that probably wouldn't stop ForBarr pointing their clients to SCF.

Thats not to say that there aren't opportunities for more sophisticated investors / institution who can do their own research and come to an independent view on the returns relative to that risk. They will know the business and also have sufficiently deep pockets to ride out any loss if things go pear shaped. They won't use Advisors.

There are also opportunities for those uninterested in the risk (or what Advisors have to say) and will put money in for the sole purpose of supporting AH. Clearly AH has support to December 2011 - the test for these people will be if they leave their money in after the Guarantee runs out. If SCF lasts that long these punters will be in the minority as they will be minor players since the real equity injection will come from the big players.

percy

06-07-2010, 06:29 PM

[QUOTE=Enumerate;310235]I am not recommending anything to anyone ... but as a hypothetical case:

Loved it,but what hypothetical recommendation would you make for your mother in law ,or your grandmother?

Enumerate

06-07-2010, 07:21 PM

Loved it,but what hypothetical recommendation would you make for your mother in law ,or your grandmother?

For a start ... I am not a registered financial adviser ... so I never, ever, ever make recommendations as to what or how to invest.

However, for my grandmother or mother in law, I would suggest that they investigate the following model.

Take their $100,000 and borrow a further $100,000 from the bank at 7.4% interest.

We have income requirements of $5,000 + $7,400 +28% tax for the interest. Hence we need $13,880 income.

We have $200,000 to invest ... but put aside $15,000 for the call account earning $600 per year.

We put $180,000 in SCF020 at 11.5% - earning $23,000 per year.

That leaves $5,000 for the SCFHA, as above, which allows us to buy the 38,500 units at 13cents yielding 5.71%. or about $2,198 per year.

Analysis:

If it turns to custard, we get pro rated $23,000 + $600 + $2,198 = $25,798 per year plus our $15,000 on call capital plus government guaranteed $180,000. We pay back the bank's $100,000, pay the $7,400 + 28% interest. That means we have $16,918 pro rated left - we take our $5,000 income and add the $11,918 pro rated to our income for the year.

If it all goes well ... we are in like a lizard drinking, as before!

All sorts of interesting models are possible when your basic capital is protected by the NZ government.

percy

06-07-2010, 07:28 PM

For a start ... I am not a registered financial adviser ... so I never, ever, ever make recommendations as to what or how to invest.

However, for my grandmother or mother in law, I would suggest that they investigate the following model.

Take their $100,000 and borrow a further $100,000 from the bank at 7.4% interest.

We have income requirements of $5,000 + $7,400 +28% tax for the interest. Hence we need $13,880 income.

We have $200,000 to invest ... but put aside $15,000 for the call account earning $600 per year.

We put $180,000 in SCF020 at 11.5% - earning $23,000 per year.

That leaves $5,000 for the SCFHA, as above, which allows us to buy the 38,500 units at 13cents yielding 5.71%. or about $2,198 per year.

Analysis:

If it turns to custard, we get pro rated $23,000 + $600 + $2,198 = $25,798 per year plus our $15,000 on call capital plus government guaranteed $180,000. We pay back the bank's $100,000, pay the $7,400 + 28% interest. That means we have $16,918 pro rated left - we take our $5,000 income and add the $11,918 pro rated to our income for the year.

If it all goes well ... we are in like a lizard drinking, as before!

All sorts of interesting models are possible when your basic capital is protected by the NZ government.

Well I did ask.Not the answer I thought I would get.Should you change your mind and become a finnancial advisor may I become your first client?

Enumerate

06-07-2010, 07:47 PM

Well I did ask.Not the answer I thought I would get.Should you change your mind and become a finnancial advisor may I become your first client?

Lol.

I did appreciate your point - what would the ultra simple, ultra conservative approach be? (Decided to put the leveraged model up for a bit of fun).

There is a much simpler model ...

Key point is that you can collect interest, on the SCF020s, for a full quarter - without actually owning them for a full quarter.

Lets say you have $100,000 and buy half way through the quarter - look at the www.nzx.com site and check out SCF020. The "buy per $100" and "sell per $100" prices INCLUDE accrued interest. So with your $100,000 you would get $100,197 of debentures with the entitlement for a full quarterly interest payment of $10,520/4 = $2,630.

Skip the SCFHA investment ....

You put in $100,000 into SCF020s. However, you time it until shortly before an interest payment. You get about $2,630 (with tax deducted) as your first interest payment. This is like half a year of bank equivalent income gained in a few weeks.

Enumerate

06-07-2010, 08:07 PM

I'd just like to restate .. these models explore generic approaches to structuring fix interest investments.

People reject the SCF debentures/bond because of the ability to lose up to a quarters worth of interest ... due to the delays in processing the government guarantee.

What I am trying to prove is that:

A) The government guaranteed nature of debt is worth alot ... it makes models, pointed out above, work - even the leverage case.

B) It is possible to construct a very simple structure that overcomes the risk of losing income for a quarter

If NZ's financial planners cannot see this or cannot structure an even better portfolio to deal with this risk ... then I am amazed. What matters, in a portfolio, is return for a defined level of risk. Even the 8.25% SCF debentures offer some amazing alternatives to bank deposits.

I hope that I have proven that it is worthwhile paying closer attention to the possibilities.

Do your own research or ask for a qualified expert to pass judgment on any investment proposal! Do not take these illustrative models as an investment proposal!

minimoke

07-07-2010, 10:10 AM

For a start ... I am not a registered financial adviser ... so I never, ever, ever make recommendations as to what or how to invest.{/quote]
If I may, for a moment, play devils advocate.

[quote]However, for my grandmother or mother in law, I would suggest that they investigate the following model.
There’s your first hurdle. Your mother-in-law still doesn’t think you are good enough for her child so she ain’t going to be taking no advice from you. As for granny – she’ll already have her money tied up with that nice Mr Hubbard.

Take their $100,000 and borrow a further $100,000 from the bank at 7.4% interest.
Hurdle two. Head down to the bank and say “ I want to borrow on my house so I can put money into to SCF”. The bank teller needs a good a laugh!

But lets say they are a bit more courageous than most – the best you’ll get, maybe is 30% loan on the value of your property (rather than 90% if you were to leverage into property). You're there fore not utilising 60% of the potential equity in your own property.

And since we are borrowing on the house we should take Bernard Hickeys wise words into account: "You're house will lose 30% in value"

We have income requirements of $5,000 + $7,400 +28% tax for the interest. Hence we need $13,880 income.
Not sure where the tax payment comes in - wouldn't you claim your interest as an expense and reduce your net tax payable. I might just keep the tax implications out of the equation for the time being since there are possibly some capital gain issues in there somewhere

What you will certainly need though is cash to repay principal as there is no way the bank will let you go Interest Only on a loan relating to SCF. I'd imagine that until 31 December 2011 they would be wanting big chunks back - maybe $30k a year. You could of course renegotiate along the way as SCF position firmed.

We have $200,000 to invest ... but put aside $15,000 for the call account earning $600 per year.
OK - I'm going to call you on your call account interest. You're really looking at 3% gross or there about - so thats $450 less tax: peanuts I know. So you have your $200,000. put aside $5,000 for living; $7,400 for interest and $30,000 for capital repayments. You're closer to $158k

We put $180,000 in SCF020 at 11.5% - earning $23,000 per year.
lets call it $152k earning potentially $17,100 (less tax)

That leaves $5,000 for the SCFHA, as above, which allows us to buy the 38,500 units at 13cents yielding 5.71%. or about $2,198 per year.

Analysis:

If it turns to custard, we get pro rated $23,000 + $600 + $2,198 = $25,798 per year plus our $15,000 on call capital plus government guaranteed $180,000. We pay back the bank's $100,000, pay the $7,400 + 28% interest. That means we have $16,918 pro rated left - we take our $5,000 income and add the $11,918 pro rated to our income for the year.

if it all turns to custard, say on 13 October (and Sandy Maier reckons he can make payment for the time being) you don't get any interest past the 13 Sept coupon date. You will get your $158k cash back - eventually. You'll also loose your money on the SCFHA's. You'll also having the bank knocking on your door wanting their $100k back - but you only have $30k put aside.

So you can give the bank $30k plus the remaining interest cash you'd put aside (lets call it $5,500) leaving you a shortfall of $64,500. So what do you do? You can't use your own $100k cash cos thats tied up until Treasury releases it in how many months. The bank wants its regular interest payments on the $64,500 balance in the meantime - and they have put your interest rate up because your house has dropped in value and you don't have the income to support the debt you previously had. You do have your $5,000 to live on (which you have wisely put aside) so you could use that - but that means your spare cash is pretty much shot. So now rather than thinking your rolling in loot your worried about how you are going to meet the banks demands for their interest repayments.

If it all goes well ... we are in like a lizard drinking, as before!
If not, the mother-in-law will only blame that no good piece of rubbish that married their precious child " I always knew you were trouble!!" ands thats you off the "Socks at Christmas" present list. As for Granny - she'll just trust that nice grandchild to see her right - except the grandchild is also in hock cos their money is also tied up in SCF!

All sorts of interesting models are possible when your basic capital is protected by the NZ government.
Lets not forget its actually the tax payer who is allowing people the freedom to punt on long shots.

minimoke

07-07-2010, 10:48 AM

I
.. Even the 8.25% SCF debentures offer some amazing alternatives to bank deposits.

And again leading from your post 1031 wouldn't the simplest model be to roll your money into the SCF020's. Why put it into 8% or 8.25% for a year when you can do so much better with the 020's?. I guess the answer to that might be that your Investment Advisor would miss a slice of the action if you went for the 020's under your own steam in preference to the 8% debentures

Certainly there is money to be potentially made out of SCF. But the 8.25% begs the question "what are the SCF lending rates". I presume it will have to be at the very least 9.75% plus broker margin. Thats 8.25% to investors and 1.5% into the Govt Guarantee scheme. So borrowers are paying over the odds for their loans - personal borrowers are paying 14.5% for home renovations when the friendly local bank will do it for around 6%. So who would pay over the odds - distressed borrowers who can't get a better deal else where. The borrowers risk profiles have to flow into SCF books - which will increase SCF's likelihood of a default event. If SCF can get past 31 Dec 2011 what will depositors do when there is no guarantee and the loan book is full of distressed borrowers? Investors could perhaps do better than by-passing the SCF middle man and lending directly to those who borrow from SCF - that way they would be propping up real business rather than a finance company who can't stand on its own two feet.

Alan3285

07-07-2010, 12:21 PM

Certainly there is money to be potentially made out of SCF. But the 8.25% begs the question "what are the SCF lending rates". I presume it will have to be at the very least 9.75%. Thats 8.25% to investors and 1.5% into the Govt Guarantee scheme. So borrowers are paying over the odds for their loans. So who would pay over the odds - distressed borrowers who can't get a better deal else where. The borrowers risk profiles have to flow into SCF books - which will increase SCF's likelihood of a default event. If SCF can get past 31 Dec 2011 what will depositors do when there is no guarantee and the loan book is full of distressed borrowers? Investors could perhaps do better than by-passing the SCF middle man and lending directly to those who borrow from SCF - that way they would be propping up real business rather than a finance company who can't stand on its own two feet.

Hi Minimoke,

How would I, as an investor, do that exactly?

Wouldn't my risk be that much greater due to concentration of my investment into one or a few borrowers?

Thanks,

Alan.

minimoke

07-07-2010, 02:30 PM

Hi Minimoke,

How would I, as an investor, do that exactly?

you could put your money into, for example, SPY. Alternatively hold onto your money until a helicopter or cool store company comes to market. Or we could learn off AH - he had a talent for attracting people who wanted to borrow off him

Wouldn't my risk be that much greater due to concentration of my investment into one or a few borrowers?

Thanks,

Alan.
Thats like that hoary old chestnut "how many companies should I invest in". Popular opinion seems to suggest (on another thread here somewhere) around 5 - 15 would be a good number. While you have, at face value, some information on the risk provided by SCF we have no idea of the risks associated with the hundreds of companies SCF have lent to. It may only take one or two of those to default on their repayments to SCF to trigger a guarantee default event. I'm not sure if we've seen the make up of the "bad book" - perhaps someone here has some detail - because they are the companies you'd be investing in if you put your money into SCF.

COLIN

07-07-2010, 09:14 PM

[QUOTE=minimoke;310309

And since we are borrowing on the house we should take Bernard Hickeys wise words into account: "You're house will lose 30% in value"

/QUOTE]

Splutter..............., splutter!! Not exactly the adjective I would use, I'm afraid.

.................................................. .................................................. .........................

The "Chalkie" column in today's Press (and in other Fairfax papers?) headed "GOVERNMENT RISKS OWN GOAL" has no doubt been read by keen followers of the SCF saga. It makes some very valid points, and I couldn't agree more with the concluding sentence:

"The fixing of a $40m problem at Aorangi may create a $2b SCF problem."

Enumerate

08-07-2010, 08:11 AM

The "Chalkie" column in today's Press (and in other Fairfax papers?) headed "GOVERNMENT RISKS OWN GOAL" has no doubt been read by keen followers of the SCF saga.
It makes some very valid points, and I couldn't agree more with the concluding sentence:

"The fixing of a $40m problem at Aorangi may create a $2b SCF problem."

I have not read it ... any chance of a bit of a summary?

Alex

08-07-2010, 09:03 AM

I have not read it ... any chance of a bit of a summary?

Here's the whole article:

-----------------------------------------------
Why hasn’t Sandy Maier started selling key assets to keep the beleaguered South Canterbury Finance afloat after the backwash from Allan Hubbard’s statutory management?
The Government’s move to put Allan Hubbard and a group of associated trusts into statutory management may prove a massive own goal.

The move has not only exposed the underdeveloped business plan of South Canterbury Finance chief executive Sandy Maier, but it has undone the Government’s own sneaky efforts to keep the Hubbard-associated finance company orderly.
Last Friday Maier was reported in effectively commenting on debenture inflows since Hubbard was poleaxed by the government regulatory authorities.
quoted Maier as saying SCF could pay maturing investments ‘‘for now’’.
‘‘No question that if people cease sending in new money and cease rolling over sooner or later, probably sooner, there will be a problem,’’ he said.
Asked if SCF could pay maturing debentures, he said: ‘‘The answer for now is ‘yes.’ It’s my job to ensure it stays ‘yes’.’’
Maier is arguably too honest. You don’t have to search between the lines to judge that money flows into SCF have dissipated since brand Allan Hubbard has been dented (they might be marching in support for him in Timaru, but the rest of the country suspects when the Serious Fraud Office is called in, not only poor record-keeping is at stake).
Maier’s words contrasted with those he used after a series of investor meetings spruiking debenture holders to reinvest their money.
He described those meetings as ‘‘fantastically successful’’ and having ‘‘wildly met or exceeded our expectations’’.
SCF has just under $1 billion of deposits maturing about the October deadline for the first government guarantee scheme.
Maier was reported as saying that about half of that amount was being reinvested or pledged.
But it appears that even offering the ridiculously attractive rate of 8 per cent, the government-guaranteed SCF is struggling to stay liquid.
The extension to the government guarantee only ever bought time to fix the balance sheet, which needs to be either heavily reinforced with equity or downsized.
What has puzzled Chalkie is why Maier has not been trying to move quickly in terms of asset sales. He’s seemingly putting all his chips on the government guarantee buying Hubbard enough time to raise fresh equity in the group.
Surely the situation has appeared more desperate than this from the inside, because it sure hasn’t looked fresh from the outside.
Maier has talked about SCF having three businesses – a good finance company, a bad loan book and a ‘‘private equity’’ portfolio of businesses.
The point is SCF hasn’t got enough equity to support all three businesses. SCF is like an overgeared property developer wanting to keep the holiday house on Waiheke, the Porsche and the Parnell mansion.
SCF had at the time of its last report (adjusted for Hubbard’s subsequent equity injection) about $170 million of tangible equity supporting business investments of $400m and $1.5 billion of finance assets.
If the company really wants to keep all these assets an additional (rough stab) $300m of equity is needed. That’s unlikely to be raised, so why hasn’t SCF been selling the business assets which are so ‘‘equity needy’’?
There has been a desperate need to monetise assets – the big ones being Helicopters (NZ) (supposedly worth $120m-plus) and the 34 per cent stake in Dairy Equities (about $100m).
Gee, those would be useful amounts to be putting into the kitty right now as well as getting the buyers to refinance the businesses from someone other than SCF. If Maier had started this process in March he may have already brought in $300m of cash.
Maier has been stuck between two masters. Looking pretty much like a government appointee, his one equity owner is Allan Hubbard, a reputed magpie with more appetite for debt than for selling his beloved assets.
Perhaps Hubbard has effectively blocked Maier from selling Helicopters NZ or Dairy Equities? At times it has been hard to know where the power has resided in this relationship, although it is now with Maier.
Chalkie has heard conspiracy theories that the SCF directors encouraged the statutory management move so the board could begin selling businesses.
If this is true, they and the Government have seriously miscalculated the pull the untarnished Hubbard had with debenture investors.
It will be ironic if the Government move effectively results in SCF going into liquidation prior to the extended guarantee scheme kicking in. Ironic because the Government bent over backwards to extend the guarantee to SCF, which didn’t deserve the privilege.
Chalkie has written that he believesStandard and Poor’s granting of an investment grade rating in March for SCF was nonsensical and probably born of political pressure. The nonsensical bit is evident by the fact the rating agency has subsequently downgraded the company several notches before seeing the next balance sheet.
Once the rating was secured, the Government moved with indecent haste in terms of extending the guarantee even though SCF’s balance sheet was miles away from meeting the criteria set down by the Reserve Bank.
The extension of the guarantee to SCF appeared a jack-up by the Government which did not want New Zealand’s biggest finance company going into liquidation/ receivership or the bill under a disorderly wind-up scenario.
All the Government’s efforts to protect SCF and its liability under the guarantee could be undone by the decision to place Allan Hubbard into statutory management.
The fixing of a $40m problem at Aorangi may create a $2b SCF problem.
----------------------------------------------------------------------------------------

percy

08-07-2010, 09:12 AM

Well done Alex.

Enumerate

08-07-2010, 09:56 AM

Yes, thanks Alex.

Best commentary on the SCF situation I have seen from the fourth estate. I can see why Chalkie has so many devoted followers.

I think Chalke's point about $300million equity is true, if they want to keep all the assets. I seriously doubt whether the private equity or "Bad Bank" parts will be kept. The fact that neither Scales nor Helicopters has been made part of the charging group tells me that AH wants to keep these assets intact - to be repatriated back into Southbury, say.

COLIN

08-07-2010, 12:16 PM

Enumerate

08-07-2010, 12:21 PM

I doubt if people of this experience and calibre would be risking damage to their career paths if they thought they were joining a foundering ship. I find today's message from Sandy Maier most encouraging.

I agree ... it seems to be a very positive development.

I wonder if Sandy has any jobs going in the IT shop?

Enumerate

08-07-2010, 12:54 PM

It is now 3 weeks since the SFO took the unprecedented and as yet unjustified step of putting Allan Hubbard and his wife into Statutory Management.

I would have thought this would have been plenty of time to validate any strong implications of fraud. I would have thought some public statement would have been mandatory, by this time.

All we have is Simon Botherway deeply embroiled in his brother's insolvency, with weak and feeble reasons being offered why there was no conflict of interest for his role in recommending statutory management to the Minister.

Nothing from Simon Power, as responsible Minister.

I continue to find it remarkable that Minister Power seems to wish to dispense with basic rights in our legal system and continues to favour a "rule by whim" approach over "rule by law". His proposals, as part of court procedure modernisation, to strip defendants of their right to confront their accusers is one example. A more chilling example is his attitude to the Search and Surveillance Bill - government agencies will be allowed to break laws, trespass, to conduct surveillance. Now we have Allan Hubbard's statutory management - why does Minister Power think that AH needs his permission to buy a tin of beans?

Simon Power, it seems, wants to be the chief architect of a future NZ police state.

I am still white hot with rage over this injustice to Allan Hubbard. This is a vital issue of basic justice ... the fourth estate is absent without leave, parliament is silent ... I shall certainly keep this issue top of mind at the next election.

Balance

08-07-2010, 01:11 PM

Balance

08-07-2010, 01:13 PM

I am still white hot with rage over this injustice to Allan Hubbard. This is a vital issue of basic justice ... the fourth estate is absent without leave, parliament is silent ... I shall certainly keep this issue top of mind at the next election.

Tell that to the investors who left money with AH and he recklessly shifted around his various companies - even after the writing was on the wall.

percy

08-07-2010, 01:17 PM

Enumerate

08-07-2010, 01:32 PM

Tell that to the investors who left money with AH and he recklessly shifted around his various companies - even after the writing was on the wall.

Your use of the word reckless demands proof! Do you have any? Would you expect some to be presented before or after statutory management? {HINT: one approach is "rule by law", the other is "rule by whim"}

Alan3285

08-07-2010, 01:41 PM

Your use of the word reckless demands proof! Do you have any? Would you expect some to be presented before or after statutory management? {HINT: one approach is "rule by law", the other is "rule by whim"}

Now then Enumerate, surely you are familiar with the rules:

http://bookreviewsbybobbie.files.wordpress.com/2009/08/do-not-feed-the-trolls.jpg

Alan.

Balance

08-07-2010, 02:02 PM

Your use of the word reckless demands proof! Do you have any? Would you expect some to be presented before or after statutory management? {HINT: one approach is "rule by law", the other is "rule by whim"}

If this is not reckless, what is?

http://www.briangaynor.co.nz/blog/2009/10/5/south-canterbury-finance-what-about-the-related-party-loans.html

It is fact that AH and SCF continued to pile on related party transactions after the market became very concerned after the collapse of the other finance companies. Just read back over this thread.

The huge increase in related party transactions was a huge red flag - read S&P comments in the last 2 years.

winner69

08-07-2010, 02:13 PM

... the fourth estate is absent without leave, parliament is silent ... I shall certainly keep this issue top of mind at the next election.

Hey Emunerate - you should know by now who controls the fourth estate in NZ and even if they did have the freedom you think they should have maybe there isn't a story here anyway. At least until investigations are concluded.

Just like the press seems to have gone quiet on the BP thing. Even Obama doesn't want the full extent of the disaster to come out now and what better ally than BP to make it difficult for the 'fourth estate' to do their job. Even reports that BP are subsidising the local sherrifs office payroll to ensure that life is made difficult for any investigative journalist to get anywhere near anything important

With Hubbard from a journalistic view there probably isn't a story anyway (or not one big enough to waste time on) or if there is really an injustice and some want to do some reporting maybe there are barriers being put up

Just think who may be behind the Hubbard SM and it make it make it all clearer. All I know one punter from Waimate hasn'i caused all this.

COLIN

08-07-2010, 02:46 PM

I get confused when people use the initials "SM". Do they mean:

Sandy Maier
or
Statutory Manager
or
Sado-Masochism?

(Just a lighter comment, amongst all the heavy stuff!)

Enumerate

08-07-2010, 02:47 PM

The huge increase in related party transactions was a huge red flag - read S&P comments in the last 2 years.

Key point is that SCF related party transactions are no reason, at all, to put Allan Hubbard, his wife, the cat ... the trusts and Aorangi into statutory management.

More generally, related party transactions are not cause for statutory management. Especially ones that are disclosed ...

The Gaynor blog was October 2009. Near the end of 2009 there was serious reason be concerned about the future of SCF. SCF, at that time, seemed to be in complete denial of the core issues it had to face. Management and directors were not up to the task.

Since then, we have seen Maier take the reins. If you look at Gaynor's list - some entities have ceased to be related parties and others have turned into equity!

Balance, I insist that you agree with me on this point! Minister Power owes the NZ public and explanation as to why this outrageous step, statutory management of a respected SI investor, has taken place. This is not a minor commercial issue. This is about basic rights ... Allan Hubbard should be free to enjoy his property unless deprived of this right due to criminal behavior.

The burden of proof for criminal behavior and our laws of evidence prevent state authorities from conducting "fishing expeditions" looking for faults or problems. Minister Power is trampling on these rights, in the name of regulatory intervention under the Finance Act. What is next? Is he going to institute marshal law to enforce correct parking etiquette?

Alex

08-07-2010, 03:11 PM

Enumerate

08-07-2010, 03:24 PM

Does anybody know an accurate answer to the following question? - Do NZ laws allow appointing statutory managers when a finance company handles investors' funds in a manner conflicting with what's been agreed with, or promised to, the investors?

No, this is not sufficient.

The Law Commission's recommendations are:

* that statutory management should be preserved as a remedy of last resort to be used if:
1. the affairs of a corporation cannot adequately be dealt with by any other formal and collective insolvency regime; or
2. the public interest requires it to be used.
* To suggest that the maximum initial period of statutory management should be three months, but with power to extend for a further three months;
* To suggest that decisions to invoke statutory management should be made by the High Court, with provisions for notice of the hearing to be given, and reasons to be given;
* To suggest that a report be provided to creditors and shareholders within one month, with a meeting to be held in the second month to decide what action should be taken.

However, it seems it you are Simon Power - you can do whatever you damned well please.

minimoke

08-07-2010, 04:36 PM

Some very strong appointments to key senior management positions, announced today. I doubt if people of this experience and calibre would be risking damage to their career paths if they thought they were joining a foundering ship. I find today's message from Sandy Maier most encouraging.
They look like just the sort of people SCF could do with - but perhaps six months ago would have been a better time to bring them in. I'm not so sure they are risking their career - SCF would certainly be a challenge. More of a challenge, and rewarding, rescuing someone than than maintaining or growing a bit of whatever you already you have. I'd imagine there are pretty hefty redundancy provisions and performance pay in their package to help neutralise the risk they are exposing themselves to - but with all the activity in the banking industry locally they can't go too far wrong over the next 12 months or so.

minimoke

08-07-2010, 05:16 PM

Enumerate

08-07-2010, 05:21 PM

I'm trying to recall who else has been put into Stat Man.

IMI Pacific Group Limited, Walakahai Pacific Corporation Limited, John Baylis and Willard Amaru in December 1999 and Max Resources Limited in 1998

Beagle

08-07-2010, 05:21 PM

They look like just the sort of people SCF could do with - but perhaps six months ago would have been a better time to bring them in. I'm not so sure they are risking their career - SCF would certainly be a challenge. More of a challenge, and rewarding, rescuing someone than than maintaining or growing a bit of whatever you already you have. I'd imagine there are pretty hefty redundancy provisions and performance pay in their package to help neutralise the risk they are exposing themselves to - but with all the activity in the banking industry locally they can't go too far wrong over the next 12 months or so.

Okay, i'll be brave for my first post, many would be too scared to weigh-in on this relativly heavyweight subject straight off the bat. First as a newcomer, let me briefly introduce myself.
Late 40's, an Accountant in practice, former investor in SCF, investor in the sharemarket for over twenty years.

The new appointments look good, as were the director appointments some time ago. Unfortunatly there's little question the SM of Mr Hubbard's interests has cast a dark shadow over SCF's future.
One of the key issues is how can investment advisor's now recommend clients invest in SCF given the on-going investigation and the fact that there was allready a significant degree of uncertainty hanging over the company before the SM action ? Of course that probably won't stop Forsyth Barr from clipping the tiicket, but its probably best I don't go there...at this stage anyway, Credit Sails, Feltex, need I say more ?

In my opinion, the liklyhood of SCF climbing the wall of maturities within its own resources has diminshed considerably which appears to beg the question, perhaps the Government might provide temporary cash flow assistance to bridge the gap, "too big to fail"

This may be logical as they're in it good and proper if SCF fails anyway with the key question can the losses be stemmed or mitigated by continuation of trading ?

Regarding the preference shares, I've thought about this long and hard and my conclusion is its only for the very brave. Given they're at a margin of only 2.5% over swap they were issued at a time when margins for this type of security were very thin, its seems most unlikely they'll ever get close to a dollar again, even if the company survives post the Govt Guarantee period which I think is extremly unlikely. At 13 cents on the dollar today with a maximum apparent upside of about 60 cents, that's one chance in about seven..., isn't that just gambling ?

minimoke

08-07-2010, 05:21 PM

Does anybody know an accurate answer to the following question? - Do NZ laws allow appointing statutory managers when a finance company handles investors' funds in a manner conflicting with what's been agreed with, or promised to, the investors?
Heres S39 of the Corporations (Investigation and Management) Act 1989

Grounds on which corporation can be declared to be subject to statutory management
The Securities Commission shall not make a recommendation under section 38 of this Act in respect of a corporation unless it is satisfied on reasonable grounds—
(a) That the corporation is, or may be, a corporation to which this Act applies; and
(b) That, in the case of a corporation that is, or may be, operating fraudulently or recklessly, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—
(i) Limiting or preventing the risk of further deterioration of the financial affairs of the corporation; or
(ii) Limiting or preventing the carrying out, or the effects of, any fraudulent act or activity; or
(iii) Enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way:
(c) That, in the case of a corporation referred to in section 4(b) of this Act, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—
(i) Preserving the interests of its members or creditors or beneficiaries or the public interest; or
(ii) Enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way.

Now tonights homework is: Name the companies that have met this criteria in the past 5 years.

winner69

08-07-2010, 05:23 PM

So they got the guy who as a director of hanover seemed to have got a better deal for Hotchin et al than for the hangover investors .... good one

COLIN

08-07-2010, 05:37 PM

Enumerate: You touch on a very salient point, i.e. in a civil society who should have the actual power to boot an individual into something as drastic and as freedom-depriving as Statutory Management? Should it be the Executive arm of Government or the judiciary? I would have thought the latter. Even a search warrant to rummage through my house requires the signature of a judge. As you so rightly point out, we like to pride ourselves that we are not in a police state - not yet, anyway. I, and others I know of, share your concern as to the disturbing nature of this whole development.

COLIN

08-07-2010, 05:40 PM

IMI Pacific Group Limited, Walakahai Pacific Corporation Limited, John Baylis and Willard Amaru in December 1999 and Max Resources Limited in 1998

Does anyone remember the JBL Group, who I seem to recall were placed into Statutory Management away back in the 60's I think it was?
Shows how ancient I am.

COLIN

08-07-2010, 05:45 PM

Heres S39 of the Corporations (Investigation and Management) Act 1989

Grounds on which corporation can be declared to be subject to statutory management
The Securities Commission shall not make a recommendation under section 38 of this Act in respect of a corporation unless it is satisfied on reasonable grounds—
(a) That the corporation is, or may be, a corporation to which this Act applies; and
(b) That, in the case of a corporation that is, or may be, operating fraudulently or recklessly, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—
(i) Limiting or preventing the risk of further deterioration of the financial affairs of the corporation; or
(ii) Limiting or preventing the carrying out, or the effects of, any fraudulent act or activity; or
(iii) Enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way:
(c) That, in the case of a corporation referred to in section 4(b) of this Act, it is desirable that the corporation be declared to be subject to statutory management for the purpose of—
(i) Preserving the interests of its members or creditors or beneficiaries or the public interest; or
(ii) Enabling the affairs of the corporation to be dealt with in a more orderly or expeditious way.

Now tonights homework is: Name the companies that have met this criteria in the past 5 years.
Interesting that the reference is only to "Corporations". No mention of individuals (human beings that is, in case we have forgotten.)

minimoke

08-07-2010, 05:46 PM

Does anyone remember the JBL Group, who I seem to recall were placed into Statutory Management away back in the 60's I think it was?
Shows how ancient I am.
Head of the Serious Fruad office at the time Charles Sturt said:""The company was in dire straits and innocent investors were still being encouraged to pour in their hard-earned cash.". They were into fishing, property and building. Loads of related party loans and complex cashflows. Early '70's it was - have we moved on and learnt?

Dr_Who

08-07-2010, 05:48 PM

So they got the guy who as a director of hanover seemed to have got a better deal for Hotchin et al than for the hangover investors .... good one

Desperado

http://www.nbr.co.nz/article/south-canterbury-finance-gets-new-managers-125846

minimoke

08-07-2010, 05:49 PM

Interesting that the reference is only to "Corporations". No mention of individuals (human beings that is, in case we have forgotten.)

you need S40 for that one"
Grounds on which associated person can be declared to be subject to statutory management
The Securities Commission shall not make a recommendation under section 38 of this Act in respect of an associated person of a corporation unless it is satisfied on reasonable grounds that—
(a) An Order in Council could be made in respect of that associated person on any of the grounds specified in section 39 of this Act; or
(b) The business and affairs of the corporation are so closely connected with that associated person that the statutory manager or statutory managers would be unable to exercise effectively the powers conferred by this Act in relation to the corporation unless the statutory manager or statutory managers is or are appointed as statutory manager or statutory managers of the associated person.

winner69

08-07-2010, 05:50 PM

Colin ... those were the days

Heres the rogue gallery of those days ..... in 20 years time we prob will read the same story but replacing the names with Hotchin, Hubbard, Hangover, Nathans, SCF etc etc

Things haven't really changed have they

That Charles Sturt was a good guy

minimoke

08-07-2010, 05:50 PM

IMI Pacific Group Limited, Walakahai Pacific Corporation Limited, John Baylis and Willard Amaru in December 1999 and Max Resources Limited in 1998

And how could we forget Chase Corp

winner69

08-07-2010, 05:59 PM

Desperado

http://www.nbr.co.nz/article/south-canterbury-finance-gets-new-managers-125846

Jeez - the comments after that article are pretty damming .... but that is expected from the Viaduct boys mouthing off the Southern guys .... whoops some of them are Viaduct guys

minimoke

08-07-2010, 06:05 PM

Even a search warrant to rummage through my house requires the signature of a judge.
Umm, actually no. You could be quietly walking at the bottom of the Port Hills minding your own business. The police have the power to search you without a warrant. Its part of a liquor ban area and if they think you have grog on you, you're stripped! If they think you have drugs in your House they can stroll in without a warrant.

percy

08-07-2010, 06:25 PM

Okay, i'll be brave for my first post, many would be too scared to weigh-in on this relativly heavyweight subject straight off the bat. First as a newcomer, let me briefly introduce myself.
Late 40's, an Accountant in practice, former investor in SCF, investor in the sharemarket for over twenty years.

The new appointments look good, as were the director appointments some time ago. Unfortunatly there's little question the SM of Mr Hubbard's interests has cast a dark shadow over SCF's future.
One of the key issues is how can investment advisor's now recommend clients invest in SCF given the on-going investigation and the fact that there was allready a significant degree of uncertainty hanging over the company before the SM action ? Of course that probably won't stop Forsyth Barr from clipping the tiicket, but its probably best I don't go there...at this stage anyway, Credit Sails, Feltex, need I say more ?

In my opinion, the liklyhood of SCF climbing the wall of maturities within its own resources has diminshed considerably which appears to beg the question, perhaps the Government might provide temporary cash flow assistance to bridge the gap, "too big to fail"

This may be logical as they're in it good and proper if SCF fails anyway with the key question can the losses be stemmed or mitigated by continuation of trading ?

Regarding the preference shares, I've thought about this long and hard and my conclusion is its only for the very brave. Given they're at a margin of only 2.5% over swap they were issued at a time when margins for this type of security were very thin, its seems most unlikely they'll ever get close to a dollar again, even if the company survives post the Govt Guarantee period which I think is extremly unlikely. At 13 cents on the dollar today with a maximum apparent upside of about 60 cents, that's one chance in about seven..., isn't that just gambling ?

Roger,
Great first post.Look forward to more of your posts.

mouse

08-07-2010, 07:46 PM

isn't that just gambling ?
Isnt being in the Market today a fair amount of gambling, be it Pyne Gould, PGGWrightson or Pike Coal? Without even mentioning SCF?

percy

08-07-2010, 08:15 PM

isn't that just gambling ?
Isnt being in the Market today a fair amount of gambling, be it Pyne Gould, PGGWrightson or Pike Coal? Without even mentioning SCF?

In the market today means owning shares inPGC.PGW,RYM,AIA,SCY.EBO,ABA,NPX,CCC FBU. Being a shareholder means you are a part owner of whichever business you own shares in.
All of these companies go about their business every day supplying goods and services to customers.They employ thousands of people,pay millions of dollars of wages and taxes.
Some will do very well,some not so well,some will takeover other companies,some will be taken over,some will go out of business.
So as not to gamble,an investor will look at them,analysis their record ,their balance sheet,their management and their prospects before buying a part ownership. Buying into a business or buying a debt issue you do not understand is gambling.We all know people who have record of achievement and know others who are losers.Who do you invest in,or lend money to?

Balance

08-07-2010, 08:32 PM

In the market today means owning shares inPGC.PGW,RYM,AIA,SCY.EBO,ABA,NPX,CCC FBU. Being a shareholder means you are a part owner of whichever business you own shares in.
All of these companies go about their business every day supplying goods and services to customers.They employ thousands of people,pay millions of dollars of wages and taxes.
Some will do very well,some not so well,some will takeover other companies,some will be taken over,some will go out of business.
So as not to gamble,an investor will look at them,analysis their record ,their balance sheet,their management and their prospects before buying a part ownership. Buying into a business or buying a debt issue you do not understand is gambling.We all know people who have record of achievement and know others who are losers.Who do you invest in,or lend money to?

Gambling = chance & luck & maybe, some skill.

Investing = analysis first and foremost.

Enumerate

08-07-2010, 09:55 PM

Welcome, Roger!

Given they're at a margin of only 2.5% over swap they were issued at a time when margins for this type of security were very thin, its seems most unlikely they'll ever get close to a dollar again, even if the company survives post the Govt Guarantee period ...

Point of correction here, the interest rate varies, year by year, as the interest rate is reset using the bank bill swap rate in October. So, they are not locked into an unnaturally low "interest rate".

Also, while the dividend rate is fixed, each year - the amount payable is fully imputed - there is a cash topup mechanism if SCF doesn't have the necessary imputation credits.

At 13 cents on the dollar today with a maximum apparent upside of about 60 cents, that's one chance in about seven..., isn't that just gambling ?

The prefs behave like equity ... because of the deep subordination of the debt and the perpetual nature of the security.

I have a feeling that we will see a price sub-10cents per unit before the next chapter of the "SCF story" is written. I believe the odds of SCF surviving are significantly greater than the odds implied by the SCFHA price.

Further, I believe there is recovery value in the Prefs due to the recent introduction of equity assets to shore up the SCF balance sheet.

Buying SCFHAs is a risky proposition. However, all the risks are on the table and are blown up, in the minds of investors, by the constant dirge of impending doom coming from press commentators. Hanover in 2008 had even greater risks associated with it ... but these were all hidden.

Markets are nearly always too exuberant or too fearful. They are only sometimes efficient.

COLIN

08-07-2010, 10:52 PM

Welcome, Roger!

Point of correction here, the interest rate varies, year by year, as the interest rate is reset using the bank bill swap rate in October. So, they are not locked into an unnaturally low "interest rate".

Also, while the dividend rate is fixed, each year - the amount payable is fully imputed - there is a cash topup mechanism if SCF doesn't have the necessary imputation credits.

The prefs behave like equity ... because of the deep subordination of the debt and the perpetual nature of the security.

I have a feeling that we will see a price sub-10cents per unit before the next chapter of the "SCF story" is written. I believe the odds of SCF surviving are significantly greater than the odds implied by the SCFHA price.

Further, I believe there is recovery value in the Prefs due to the recent introduction of equity assets to shore up the SCF balance sheet.

Buying SCFHAs is a risky proposition. However, all the risks are on the table and are blown up, in the minds of investors, by the constant dirge of impending doom coming from press commentators. Hanover in 2008 had even greater risks associated with it ... but these were all hidden.

Markets are nearly always too exuberant or too fearful. They are only sometimes efficient.
And its worth reiterating that Southbury (Alan Hubbard) has to lose every cent of his ordinary equity in SCF before perpetual preference shareholders lose a bean, in the event of a winding up. Clearly I do not believe that will happen. Its interesting to note that the volumes on the buy and sell side of the SCFHA's are about equal at the moment; and buying volume far outweighs selling volume on the SCF010's.

temuk

08-07-2010, 11:10 PM

Just think who may be behind the Hubbard SM and it make it make it all clearer. All I know one punter from Waimate has caused all this.

Heard today the dobber is a resently retired director that still owes a 6 figure sum to SFC.

P.S. I am only passing on what I have heard.
N.B. please don't shoot the messenger !!

minimoke

09-07-2010, 09:26 AM

Heard today the dobber is a resently retired director that still owes a 6 figure sum to SFC.

P.S. I am only passing on what I have heard.
N.B. please don't shoot the messenger !!
So, if thats a recently retired director of SCF, thats got to be either Stuart Nattrass or Robert White. So what do we make of that. Who knows.

But we could start a trail from Robert White, ex Director of Aorangi Securities. Back in 2005 Aorangi had 5 directors. Duncan Brand, Paul Hewitson, Christopher Stark, Robert White and Alan Hubbard. Like the 10 green bottles year by year the directors all resigned so that by 2010 there was only Alan left. Only one new director came on Board and that was Margaret.

But then again Stuart Natrass, through Rathgen Holdiongs Limited has a stake in Southbury Corp. So if Lauchie Mcleod was loaned $15m for his 1m shares how much was Nattrass loaned for his 37,500 shares. Its probably fair to assume there is a loan since SCF also had $750,000 owed by Ed Sullivan.

Or we could go back to Aorangi and check out Paul Hewitsons shareholding in SCF which is around 47,000 or Christopher Stark or Duncan Brand who have 27,000 each

C'mon Temuk name a name!

GTM 3442

09-07-2010, 09:30 AM

Still curious to know who would gain from the "dobbing in". Also what they'd gain.

mouse

09-07-2010, 09:41 AM

So as not to gamble,an investor will look at them,analysis their record ,their balance sheet,their management and their prospects before buying a part ownership. Buying into a business or buying a debt issue you do not understand is gambling.We all know people who have record of achievement and know others who are losers.Who do you invest in,or lend money to?
The problem with the Western World, and the rest of the world, is we are relying upon one country to pull us out of the trough. The minor problem with that is the country who is hopefully going to do the pulling is run by the local version of The Mafia. So where does your careful analysis go then? You can only analyise so far. After that it is pure guesswork. Heads or Tails?

winner69

09-07-2010, 09:58 AM

I agree the cat should not be in Stat Management - he probably is the only innocent one in this whole affair

minimoke

09-07-2010, 10:40 AM

I agree the cat should not be in Stat Management - he probably is the only innocent one in this whole affair
Did the cat take advantage of that naive wee sparrow that was lured into the bird bath filled with the promise of clear fresh water in the Hubbards back yard - YES it did.

Was anyone holding a gun to the cats head as it supped from the bowl of Jellymeat purchased in a "cash for asset" transaction (with no paper trail!) that was probably made by Mrs H and without the Trustees knowledge. NO, the cat voluntarily scoffed down the Jelly meat AND also licked at the bowl of fresh cream which had been separated specially for it from the rest of the milk.

Did the cat share its companionship with all and sundry - or was it just a select few. Its been reported no-one in Auckland saw the Cat!

Did the Cat prefer to warm itself in the engine well of a Mercedes or a VW. Sources say it was the VW!!!!!!!!!

Ohh - that cats got guilt written all over its whiskers. Call in the SPCA and get it off to the pound straight away I say!

Balance

09-07-2010, 10:40 AM

I say good on the whistle blower.

Whether SM is the right thing or not is a matter for debate - what is not at dispute is that there are serious problems and issues at the house of AH which required proper investigation to protect investors.

winner69

09-07-2010, 10:45 AM

Did the cat take advantage of that naive wee sparrow that was lured into the bird bath filled with the promise of clear fresh water in the Hubbards back yard - YES it did.

Was anyone holding a gun to the cats head as it supped from the bowl of Jellymeat purchased in a "cash for asset" transaction (with no paper trail!) that was probably made by Mrs H and without the Trustees knowledge. NO, the cat voluntarily scoffed down the Jelly meat AND also licked at the bowl of fresh cream which had been separated specially for it from the rest of the milk.

Did the cat share its companionship with all and sundry - or was it just a select few. Its been reported no-one in Auckland saw the Cat!

Did the Cat prefer to warm itself in the engine well of a Mercedes or a VW. Sources say it was the VW!!!!!!!!!

Ohh - that cats got guilt written all over its whiskers. Call in the SPCA and get it off to the pound straight away I say!

Cats biggest sin was he didn't catch the rats

percy

09-07-2010, 10:57 AM

The problem with the Western World, and the rest of the world, is we are relying upon one country to pull us out of the trough. The minor problem with that is the country who is hopefully going to do the pulling is run by the local version of The Mafia. So where does your careful analysis go then? You can only analyise so far. After that it is pure guesswork. Heads or Tails?

Sorry if I change the subject but there is a great story adout the sharebroker in London who brought up all the shares he could just at the hight of the Cuban affair when there looked as though there was going to be a Nuclear war.If there was he would not have to pay for them.If there was no war then the markets would recover and he would make a fortune,which he did.Heads he won!!

Beagle

09-07-2010, 11:02 AM

Thanks for the warm welcome guys.

Unpacking the "gambling" a little, really its an "all or nothing" situation with the key apparent question being, are all the deliquent loan skeletons out of the closet, or is there significant further provisioning forthcoming once the Auditiors run their ruler over the end of year financials ?

I'm in the latter camp and the double dip camp for that matter also. One of the key reasons is that small business in N.Z is finding things very very tough, I know this from my practice and if the majority of my clients are struggling, (and we know from the recent Institiute of Economic Research report that they're not alone), its widespread throughout N.Z., in effect many of SCF's customers must also be struggling.

I think its worth pointing out that the last thorough "independent" provisioning was as at 31 December 2009 and clearly the economy has been far from robust since then. SM himself has pointed out that further provisioning may be necessary, to exactly what extent is clearly the key question.

Regarding the preference shares, as has been astutely pointed out the dividend rate is re-set each year, but its reset based on the interbank 1 year swap rate plus a margin of 2.5%. Unpacking this, firstly in my view interest rates will remain low for a protracted period of time so its unlikely the current woefully inadequte dividend will increase much in the forseeable future. Secondly for a perpetual secuity the margin was set at a time when margins for this type of security were very low. A brief review of other perpetual securities listed on the market shows that SCF's margin was not the only one the market now considers grossly inadequate for the new, shall we say "enlightened" market conditions and there's a number trading well under par, who arn't trading under anything like the same cloud as SCF.

For what its worth Forbar, and they would be the most one-eyed and biggest backer of SCF, believe fair value over swap for a perpetual preference share of this nature is now 9% !! Even if SCF can be fixed, and that's a huge "IF", 2.5% over swap is never ever going to cut the mustard in the new environment we're in, so as mentioned yesterday I see the maximum upside as about 60 cents from here.

On the other side of the ledger, if SCF can get past the wall of maturities coming due in October, perhaps with a little Govt assistance ?, there's the liklyhood of getting three dividends, Oct 2010, April and October 2011, before the next wall arrives, so about 7.5 cents of dividends potentially forthcoming even if they do fail after October 2011.

So are the pref shares a fair "bet", it all depends whether you think SM has been straight up with his declarations regarding loan provisioning or is their another nasty surprise lurking just around the corner when the Auditors take an independent look at the situation, which might effectivly eliminate some or all of the "so called" equity AH recently introduced ?

What about them carrying over $100m in tax losses as an asset on their balance sheet, (the test here is probable utilisation of same), some would say that's very creative accounting.

winner69

09-07-2010, 11:10 AM

Minimoke .... that nattrass fellow gets around a bit .... I see he is a director Pike River as well

Enumerate

09-07-2010, 11:19 AM

... significant further provisioning forthcoming once the Auditiors run their ruler over the end of year financials ?

... and the double dip camp for that matter also.

Roger, we have a rule on this thread that new participants have to be doe eyed optimists ...

Here you are predicting further SCF loan impairments and a double dip recession. This will not do!

It is usually left to Winner, Mini, Colin and Balance to strip any trace of optimism from a new poster and to leave dreams of a recovered SCF and 3% economic growth shattered in the ditch.

You are not giving these fine gentlemen much material to work with (starting off with such a depressing prognosis).

Alan, Percy and Mouse are obviously too well bred or finely mannered to engage in such repast. However, Roger, your pessimistic views could turn these gentlemen into confirmed "gold bugs". The last postings we will see from them will be in the ASX forum - about how the world will end soon and why they are thankful they own junior Aussie gold stocks.

;-)

temuk

09-07-2010, 11:22 AM

But then again Stuart Natrass, through Rathgen Holdiongs Limited has a stake in Southbury Corp. So if Lauchie Mcleod was loaned $15m for his 1m shares how much was Nattrass loaned for his 37,500 shares. Its probably fair to assume there is a loan since SCF also had $750,000 owed by Ed Sullivan.

Or we could go back to Aorangi and check out Paul Hewitsons shareholding in SCF which is around 47,000 or Christopher Stark or Duncan Brand who have 27,000 each

C'mon Temuk name a name!

only 1 here oweing 6 figures.

minimoke

09-07-2010, 11:23 AM

Still curious to know who would gain from the "dobbing in". Also what they'd gain.
OK, I'm going to speculate and this thought has no substance based on fact. Perhaps someone could see that with the year end coming up the Accounts were going to be looked at closely. Perhaps the proverbial was going to hit the fan so an insider, or closely related party thought "best to fess up now" and do some back room deal with the Authorities to avoid or mitigate any future legal action.

Beagle

09-07-2010, 11:31 AM

minimoke

09-07-2010, 11:32 AM

Minimoke .... that nattrass fellow gets around a bit .... I see he is a director Pike River as well
theres a rumour going around that the Authorities have hired out Shed 10 to have it relocated to a secret location. Its needed because there is no space in Wellington large enough to lay out the paper needed to draw up the web of related people and companies. And when its reported that the Shed has been burnt down on "mysterious circumstances" you'll know why!

Enumerate

09-07-2010, 11:50 AM

only 1 here oweing 6 figures.

Ouch, thats gotta hurt worse than statutory management.

COLIN

09-07-2010, 11:57 AM

Umm, actually no. You could be quietly walking at the bottom of the Port Hills minding your own business. The police have the power to search you without a warrant. Its part of a liquor ban area and if they think you have grog on you, you're stripped! If they think you have drugs in your House they can stroll in without a warrant.
Not being into illicit drugs, or consuming alcohol in prohibited areas, I don't know much about that - and I doubt very much if Allan Hubbard does, either!
Thanks for posting those extracts from the statutes. I note the reference to the Order-in-Council, and while this particular extract doesn't specifically state that this is required, I am assuming that other sections of the Act do in fact make it clear that that is so. So, the Governor General, by Order-in-Council, would have signed the death warrant; I suppose, in our constitutional monarchy, you can't get much more authoritative than that. I'm no lawyer (only did Comm Law Stage I for my degree) but, wondering out loud, could such an Order be subjected to judicial review. Probably not.

winner69

09-07-2010, 12:08 PM

theres a rumour going around that the Authorities have hired out Shed 10 to have it relocated to a secret location. Its needed because there is no space in Wellington large enough to lay out the paper needed to draw up the web of related people and companies. And when its reported that the Shed has been burnt down on "mysterious circumstances" you'll know why!

The powers to be (or Simon's policemen as the adding up man would say) have been hard at work.

It is one huge web to untangle .... below is a summary of where they are up ... a summary only as each oval has its own little web as well

minimoke

09-07-2010, 12:27 PM

only 1 here oweing 6 figures.
That presumably is the $6.9m related party transaction which was up from $5.3m the previous year. But then I didn't have Andrew Borland on the list and isn't he up for $5m?

Alan3285

09-07-2010, 12:29 PM

Roger, we have a rule on this thread that new participants have to be doe eyed optimists ...

Here you are predicting further SCF loan impairments and a double dip recession. This will not do!

It is usually left to Winner, Mini, Colin and Balance to strip any trace of optimism from a new poster and to leave dreams of a recovered SCF and 3% economic growth shattered in the ditch.

You are not giving these fine gentlemen much material to work with (starting off with such a depressing prognosis).

Alan, Percy and Mouse are obviously too well bred or finely mannered to engage in such repast. However, Roger, your pessimistic views could turn these gentlemen into confirmed "gold bugs". The last postings we will see from them will be in the ASX forum - about how the world will end soon and why they are thankful they own junior Aussie gold stocks.

;-)

Not sure about being either 'well bred' or 'finely mannered'!

Not being a current SCF investor, I am just sitting on the sidelines watching in anticipation right now.

Quick and dirty thoughts - Probably missing something, so please pick this apart:

Roger pointed out there are possibly three 'reasonably certain' dividends to come (not to say only three, but I'll go with that for now). I doubt they are paying much tax, but I'll assume for the purposes of this analysis that there will be a top up to make it so that the net cash receipt comes out the same as if they were fully imputed.

Roger worked that out to be about 7.5c.

If I could pick up SCFHA for, say, 10c and I regarded the 7.5c to be an economic 'capital repayment', and taking 0.5c for the time value of money for now, then my net investment would be about 3c per pref share.

If it all falls apart, I'd expect to get none of that back.

If it doesn't then I think that medium term, 50c is not unrealistic (bit like a binary 'all or nothing').

Hence my 'return' looks like about 17-fold if it comes off.

Using the gambling analogy (although this is not just the 'pure chance' of gambling), would you put your cash on SCF at 17-to-1 ($18 I think that means in TAB-speak) to survive?

Alan.

Balance

09-07-2010, 12:44 PM

Not sure about being either 'well bred' or 'finely mannered'!

Not being a current SCF investor, I am just sitting on the sidelines watching in anticipation right now.

Quick and dirty thoughts - Probably missing something, so please pick this apart:

Roger pointed out there are possibly three 'reasonably certain' dividends to come (not to say only three, but I'll go with that for now). I doubt they are paying much tax, but I'll assume for the purposes of this analysis that there will be a top up to make it so that the net cash receipt comes out the same as if they were fully imputed.

Roger worked that out to be about 7.5c.

If I could pick up SCFHA for, say, 10c and I regarded the 7.5c to be an economic 'capital repayment', and taking 0.5c for the time value of money for now, then my net investment would be about 3c per pref share.

If it all falls apart, I'd expect to get none of that back.

If it doesn't then I think that medium term, 50c is not unrealistic (bit like a binary 'all or nothing').

Hence my 'return' looks like about 17-fold if it comes off.

Using the gambling analogy (although this is not just the 'pure chance' of gambling), would you put your cash on SCF at 17-to-1 ($18 I think that means in TAB-speak) to survive?

Alan.

If SCF goes under, you get nothing under the government g'tee.

Hard to see SCF surviving beyond this year.

Alan3285

09-07-2010, 12:57 PM

If it all falls apart, I'd expect to get none of that back.

If SCF goes under, you get nothing under the government g'tee.

Hard to see SCF surviving beyond this year.

A stunning insight or a repeat of exactly what I said?

Alan.

Balance

09-07-2010, 01:02 PM

A stunning insight or a repeat of exactly what I said?

Alan.

Repeat - save the part about SCF surviving beyond this year. SFO investigation and SM are serious matters - irrespective of rights or wrongs of using SM as an instrument. The smoke screen of outrage at the use of SM does not detract from the fact that what's happening is very very very serious.

temuk

09-07-2010, 01:16 PM

SCF also had $750,000 owed by Ed Sullivan.

C'mon Temuk name a name!

I've narrowed it down and by the way I wouldn't trust this fella, he casts a fairly big shadow.

minimoke

09-07-2010, 01:47 PM

I've narrowed it down and by the way I wouldn't trust this fella, he casts a fairly big shadow.
Duh - currently hitting self with sledgehammer!!!

Enumerate

09-07-2010, 02:03 PM

temuk

09-07-2010, 02:05 PM

Duh - currently hitting self with sledgehammer!!!

that's ok Mini, must have been a hard week !
hope you make up for it with a hard weekend.

Alan3285

09-07-2010, 02:25 PM

minimoke

09-07-2010, 03:06 PM

that's ok Mini, must have been a hard week !

Yeh - too many things on the go at once. Which makes me wonder how effective a Director can be when he is Director to hundreds of companies and shareholder of dozens and dozens. Didn't someone say earlier 5 - 15 investments is a good number to keep track of what is happening within each of your investments!

Beagle

09-07-2010, 03:13 PM

Last trade on SCFHA at 15cents.

Bid side looks fairly solid ... ask side looks fairly scattered. I hate it when the price gets away on you without getting your fill.

Time for Bernard Hickey to grab a few more headlines by predicting a plague of locusts will ravage South Canterbury Finance ...

As most people pay tax, net potential dividends till Dec 2011 are around 5 cents, at 15 cents I think the pref shares look fully priced.

There's clear evidence that inflows have dropped significantly since the SM, and its hard to see how SCF can climb the forthcoming maturity wall without help.

So, are they likely to get any ? What are the odds on a significant capital injection? How would such a party be able to accuratly assess the loan book, (one would like to think they would do a better job of due dilligence than Allied did when it took the hospital pass from hand-over), but how is this possible within the time frame of 31 August given that at this stage the companies accounts will be nowhere near finalised for the year ended 30 June 2010 ?

Will the Trustee grant another extension past 31 August, under political pressure ?, probably....
Will the Govt give some sort of bridging finance to help SCF climb the wall and enable a more orderly down-sizing of the balance sheet ? anyone's guess.

I find it hard to imagine that properly and independently provisioning the loan book as at 30 June 2010, taking off $100m plus for tax losses on the balance sheet that simply shouldn't be there and further adjustments for related party transactions and other non-recoverable items, is there really much, if any, real equity left in the business.

There's little doubt AH would see things very differently than I but now, rightly or wrongly he's out of the decision making process, doesn't that significantly enhance the chance of a realistic and objective valuation of the existing shares so that a new capital partner can make an injection on a commercially acceptable basis and doesn't this enhance the crown's position now they're in charge of the negotiating process, (less liklihood of a collapse with a greater liklihood of a capital injection), could that be a part of the reason they put AH and Aorangi into SM ?....oh dear I've talked myself into a conspiracy theory.....better go and do some real work...

Balance

10-07-2010, 09:52 AM

Key point is that SCF related party transactions are no reason, at all, to put Allan Hubbard, his wife, the cat ... the trusts and Aorangi into statutory management.

More generally, related party transactions are not cause for statutory management. Especially ones that are disclosed ...

The Gaynor blog was October 2009. Near the end of 2009 there was serious reason be concerned about the future of SCF. SCF, at that time, seemed to be in complete denial of the core issues it had to face. Management and directors were not up to the task.

Since then, we have seen Maier take the reins. If you look at Gaynor's list - some entities have ceased to be related parties and others have turned into equity!

Balance, I insist that you agree with me on this point! Minister Power owes the NZ public and explanation as to why this outrageous step, statutory management of a respected SI investor, has taken place. This is not a minor commercial issue. This is about basic rights ... Allan Hubbard should be free to enjoy his property unless deprived of this right due to criminal behavior.

The burden of proof for criminal behavior and our laws of evidence prevent state authorities from conducting "fishing expeditions" looking for faults or problems. Minister Power is trampling on these rights, in the name of regulatory intervention under the Finance Act. What is next? Is he going to institute marshal law to enforce correct parking etiquette?

Sorry, matey - cannot agree with you yet on this one. I have heard many stories of some of the highly respected investors and businessmen in NZ - how some of them made their money and how some of them keep it make for sobering reading. Respected as a word would be a total insult to the young soldiers who gave their lives on the battlefields to liberate the world from the likes of Hitler.

Good news is that the report from the SM is due shortly. Let's see what it says and who is right and wrong.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10657780

Excerpt :

"The commission believed the Hubbard's Aorangi Securities, which was originally a contributory mortgage company, had been operating as a finance company.

Aorangi Securities had deposits of at least $98 million from 407 Otago and Canterbury investors, but many of its loans - worth $134 million in total - were inadequately documented or even unsecured.

Some appeared to have been made contrary to instructions from investors that their money be loaned only on first mortgages."

All very serious charges.

I am prepared to bet that AH has been using some of the money to prop up SCF. Imagine how you feel as an investor if you left $1m with AH and found that it has found its way to SCF?

Enumerate

10-07-2010, 10:19 AM

"The commission believed the Hubbard's Aorangi Securities, which was originally a contributory mortgage company, had been operating as a finance company.

Aorangi Securities had deposits of at least $98 million from 407 Otago and Canterbury investors, but many of its loans - worth $134 million in total - were inadequately documented or even unsecured.

Some appeared to have been made contrary to instructions from investors that their money be loaned only on first mortgages."

All of which have remedies under the Companies Act, the Finance Act etc. I repeat, where is the case for Statutory Management?

All very serious charges. I am prepared to bet that AH has been using some of the money to prop up SCF.

If you believe that hearsay or opinion should be the basis of a "serious charge".

Simon Power's Gestapo are operating outside the justice system. Who is representing Allan Hubbards rights? Where are the traditional laws of evidence? Does Simon Power intend to imprison Allan Hubbard by Ministerial directive?

Why, Balance, are you so unconcerned by this?

Sieg Heil <- Hail to Victory (an example of what happens when you put "the end" (prosecution of Allan Hubbard) over the "the means" (our British system of justice)

Balance

10-07-2010, 11:38 AM

All of which have remedies under the Companies Act, the Finance Act etc. I repeat, where is the case for Statutory Management?

If you believe that hearsay or opinion should be the basis of a "serious charge".

Simon Power's Gestapo are operating outside the justice system. Who is representing Allan Hubbards rights? Where are the traditional laws of evidence? Does Simon Power intend to imprison Allan Hubbard by Ministerial directive?

Why, Balance, are you so unconcerned by this?

Sieg Heil <- Hail to Victory (an example of what happens when you put "the end" (prosecution of Allan Hubbard) over the "the means" (our British system of justice)

I am not concerned because I believe the decision to use SM on AH was not made lightly. It was NOT applied willy nilly unlike some of the comments coming from AH's unquestioning and blinkered-eyed admirers.

SM is nothing new - it was applied liberally after the 1977 share market crash. It is intended precisely for the situation re AH - a tangled and intertwined web of related party transactions. AH ultimately will have recourse to huge damages if the SM is proved to be inappropriate.

I am more concerned with the unadulterated unquestioning admiration of AH as a person beyond reproach. Read back some of the comments on this thread. Post the collapse of most of the finance companies, SCF continued to pile up related party transactions - totally contrary to market concerns and investors' fear. The sheer arrogance defies any sympathy.

Of course those who borrowed money from AH and SCF are going to come out in support - heck, they are the beneficiaries of his style of business.

Someone has to act for the investors however - and quickly.

The fact that the authorities were totally incompetent and inept with the likes of Bridgecorp, Capital & Merchant etc - that's history and let's condemn the Diplocks of this world accordingly.

To sit back and do nothing because of past action - might as well sell NZ to the English, Italians, Russians and Americans? Funny how there has been no outcry about our country being sold to the mafia?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10657870

Balance

10-07-2010, 12:08 PM

Enumerate,

Please read this.

http://www.lostsoulblog.com/2010/07/natural-justice-for-hubbard.html

Enumerate

10-07-2010, 12:17 PM

I am not concerned because I believe the decision to use SM on AH was not made lightly.

Who made this decision?

A High Court Judge? No .... It is by order in council

This is Simon Power making a decree ... declaring a legislative action to put Mr Hubbard into management by the crown appointed agency.

How does Mr Hubbard's property rights differ from this right to life, liberty and pursuit of happiness (as the Americans would say)? There is no difference - property rights are fundamental - like free speech, the right to confront your accusers at a fair trial, the right to due process.

Due process is the principle that the government must respect all of the legal rights that are owed to a person according to the law. Due process holds the government subservient to the law of the land, protecting individual persons from the state.

This is the third week in which Allan Hubbard has been subjected to this extraordinary abuse of executive powers by the government. At this stage, nothing has been said that justifies this abuse. Do you think a High Court Judge would have granted a warrant for the search, seizure and administration of Allan Hubbard's property? I can categorically tell you this the power exercised over Mr Hubbard for the evidence presented is completely unprecedented. Minister Power would be laughed out of court, if he had made the request of a High Court Judge.

We have an order in council. Where is the harm? No loans have defaulted, no debt is in arrears. Why don't the people involved simply ask for their money back?

What is next? Does Minister Power expect to use waterboarding techniques to extract further "evidence" from Mr Hubbard?

Minister Power's legislative agenda and executive actions have proven only one thing - that he is an unconscious Nazi.

Balance, you have to address the key issue in this case: "Has Statutory Management deprived Allan Hubbard of his right to due process?". Focus on this question and do not distract yourself with idle nonsense about how Statutory Management has been applied in the past (there is one case, I believe, in which it has applied to an individual - not the "liberal application" you claim - which, by the way is no justification) or the fact that there are a body of Allan Hubbard supporters who offer unquestioning loyalty (which, in my view, is not a problem in any way shape or form - people trust the evidence of their own senses rather than government officials - this is a good thing).

Enumerate

10-07-2010, 12:30 PM

Enumerate,

Please read this.

http://www.lostsoulblog.com/2010/07/natural-justice-for-hubbard.html

I have read it ... what is your point?

It seems Mr Hubbard is seeking a judicial review of Minister Power's action. Perhaps Minister Power believes that no judge is going to criticise "the boss" (the Minister of Justice"). If this is the case ... I have a feeling that the minister is in for a very unpleasant shock.

Enumerate

10-07-2010, 12:43 PM

I have called for a demonstration of a clear case in which "the Public Interest" is protected by the Statutory Management of Allan Hubbard.

I would point out that related party transactions are NOT a demonstration of a threat to "the Public Interest". Issues of the relevance of investment without a prospectus - which is legal to sophisticated or habitual investors - there are standard legal injunctions for dealing with this - where is the threat to the "Public Interest"? That basically silences about the only criticisms leveled at Allan Hubbard.

So ... where is this evidence of impropriety? .... silence ....

Given this, how can there be a case of protection of "the Public Interest"? ... silence ....

Given this, how can there be a case for the Statutory Management of Allan Hubbard? ... silence ...

Does Minister Power have a case to answer for abuse of his executive powers? This is becoming a very interesting question ... I think there will be alot to be said about this in the near future.

Balance

10-07-2010, 12:47 PM

I have called for a demonstration of a clear case in which "the Public Interest" is protected by the Statutory Management of Allan Hubbard.

I would point out that related party transactions are NOT a demonstration of "the Public Interest". That basically silences about the only criticism leveled at Allan Hubbard.

So ... where is this evidence of impropriety? .... silence ....

Given this, how can there be a case of protection of "the Public Interest"? ... silence ....

Given this, how can there be a case for the Statutory Management of Allan Hubbard? ... silence ...

Does Minister Power have a case to answer for abuse of his executive powers? This is becoming a very interesting question ... I think there will be alot to be said about this in the near future.

The Report is due out soon - let's wait, shall we?

If there's no substance, I will be out there with you confronting Simon Power - that I promise you.

And if AH is charged with fraud?

Then, what happens?

Remember Madoff got away with fraud for how many years and how many billions of dollars?

Alan3285

10-07-2010, 01:10 PM

What redress will AH have against govt if the whole thing is simply scarmongering? ... Would I be right is saying very little? ... A poor law if it doesn't work both ways !!!!

More to the point, his redress ought to be against BOTH the govt AND the specific individuals that made any erroneous decisions.

Question: How can AH engage legal representation when he is in Stat Mgt and cannot control his own affairs?

Just wondering...

Alan.

Balance

10-07-2010, 01:15 PM

More to the point, his redress ought to be against BOTH the govt AND the specific individuals that made any erroneous decisions.

Question: How can AH engage legal representation when he is in Stat Mgt and cannot control his own affairs?

Just wondering...

Alan.

Let's not be bush lawyers.

AH is not without means. Heck, his supporters are prepared to fund him, no?

BTW - have anyone of you actually seen an AH deal?

Enumerate

10-07-2010, 01:28 PM

The judicial review should proceed independent of anything "uncovered" by the Statutory Management process.

This ruling ... by those entitled rule on matters of law ... should have been sought at the very beginning of this mess.

Minister Power is too enthusiastic a supporter of giving prosecutors rights and powers above and beyond those they prosecute. I for one hope that High Court Justices put him back in his box.

If Minister Power had his way ... the highest court in the land would be the Court of Kangaroo - Minister Power presiding.

Balance

10-07-2010, 01:36 PM

Enumerate

10-07-2010, 01:48 PM

The Report is due out soon - let's wait, shall we?

If there's no substance, I will be out there with you confronting Simon Power - that I promise you.

And if AH is charged with fraud?

The end does NOT justify the means.

Extracting a "confession" under torture does not justify the use of torture.

Violating "due process" for the sake of evidence gathering is simply an outrage.

In clause 39 of the Magna Carta, John of England promised as follows: "No free man shall be seized or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send others to do so, except by the lawful judgment of his equals or by the law of the land."

Has Minister Power met the test ... I certainly don't think so.

I do also note that Sandy Maier is a JD from Harvard! Impressive. If anyone could be expected to understand these issues ... it would be him.

winner69

10-07-2010, 02:13 PM

I do also note that Sandy Maier is a JD from Harvard! Impressive. If anyone could be expected to understand these issues ... it would be him.

Ministers and there departments aften don't take drastic action unless there has been a fair amount of lobbying ...... wonder who was doing the lobbying

One thing --- the cat is innocence

Balance

10-07-2010, 02:30 PM

More to the point, his redress ought to be against BOTH the govt AND the specific individuals that made any erroneous decisions.

Question: How can AH engage legal representation when he is in Stat Mgt and cannot control his own affairs?

Just wondering...

Alan.

Just read article in NBR. Russell McVeagh has been engaged by AH to seek a judicial review.

Let's see what happens.

The truth will out, and justice will ultimately prevail.

Balance

10-07-2010, 02:41 PM

Ministers and there departments aften don't take drastic action unless there has been a fair amount of lobbying ...... wonder who was doing the lobbying

One thing --- the cat is innocence

Sandy was Statutory Manager for DFC. He knows how the game is played.

Question : If you were AH, would you willingly accept the President for life position? Remember that he basically owns SCF.

Alan3285

10-07-2010, 02:50 PM

Let's not be bush lawyers.

Just because I don't know something, or don't WANT to know something, doesn't mean I should try to disuade others from finding out.

AH is not without means. Heck, his supporters are prepared to fund him, no?

That's exactly the point that Enumerate is making - the state has seized control of his 'means' without apparent due process.

I am disappointed if you think that it is up to his supporters to fund his legal representation.

Alan.

Balance

10-07-2010, 03:00 PM

Just because I don't know something, or don't WANT to know something, doesn't mean I should try to disuade others from finding out.

That's exactly the point that Enumerate is making - the state has seized control of his 'means' without apparent due process.

I am disappointed if you think that it is up to his supporters to fund his legal representation.

Alan.

I am making the point that AH is now without means. He is still worth millions.

Of course it is not up to his supporters to fund his legal representation - the point is that they are so one-eyed unquestioning they must be super-confident it's a complete mis-carriage of justice.

Question still - have anyone of you actually seen an AH deal?

Alan3285

10-07-2010, 03:07 PM

I am making the point that AH is now without means. He is still worth millions.

I think we agree then, but the point is, how does anyone under Stat Mgt actually engage a lawyer (or buy a loaf of bread) if they are, as you put it, 'without means'?

Does the Stat Mgr give you 'pocket money'? Do they decide what you should be eating, and buy your groceries for you?

Does that mean you are, practically speaking, restricted in terms of movements (since you can't pay for transport) unless you want to walk?

Alan.

winner69

10-07-2010, 03:11 PM

I think we agree then, but the point is, how does anyone under Stat Mgt actually engage a lawyer (or buy a loaf of bread) if they are, as you put it, 'without means'?

Does the Stat Mgr give you 'pocket money'? Do they decide what you should be eating, and buy your groceries for you?

Does that mean you are, practically speaking, restricted in terms of movements (since you can't pay for transport) unless you want to walk?

Alan.

As long as the cat is feed justice is being done .... wouldn't want Mr and Mrs Hubbard or the Stat Man charged under the Animal Cruelty Act would we

Enumerate

10-07-2010, 04:04 PM

The truth will out, and justice will ultimately prevail.

I see you agree with me.

The present situation is unjust - Allan Hubbard has been deprived of due process and must seek to restore his rights through judicial review. Through this adversity, by overcoming this injustice ... justice will ultimately prevail.

mouse

10-07-2010, 04:30 PM

As long as the cat is feed justice is being done .... wouldn't want Mr and Mrs Hubbard or the Stat Man charged under the Animal Cruelty Act would we
The SPCA would represent the cat. However they never represent birds....or mice. I wonder why?

winner69

10-07-2010, 04:34 PM

The SPCA would represent the cat. However they never represent birds....or mice. I wonder why?

Good one mouse .... we better not talk about Alans cat while you are around ..... even thought he cat has failed to catch the rats

COLIN

10-07-2010, 05:44 PM

Have been absent from my computer today, and cancelled my subscription to the NBR when they also wanted to charge me for viewing their on-line material. Delighted to learn that Allan H has engaged Russell McVeagh to seek a judicial review; this was a matter that I raised over the last couple of days.

Enumerate: I share your outrage, and admire the strength and eloquence of your arguments. (Will probably now be accused by Balance of being a mindless "Enumerate admirer" like all those allegedly misguided people who actually know the Hubbards and have a genuine sense that there all the hallmarks of a grave miscarriage of justice in this whole sorry affair.)

Enumerate

10-07-2010, 08:14 PM

Delighted to learn that Allan H has engaged Russell McVeagh to seek a judicial review; this was a matter that I raised over the last couple of days.

... like all those allegedly misguided people who actually know the Hubbards and have a genuine sense that there all the hallmarks of a grave miscarriage of justice in this whole sorry affair.

Like you, I don't know Mr Hubbard. He obviously has a great deal of support from people who have had direct dealings with him. Given his techno phobia - he will probably never know that his rights and the injustice he has suffered are being hotly debated on an obscure investment forum. However, this is the great thing about NZ society - most people expect to be given a "fair go" and will stand up and be counted when they see someone trampled upon - even by the "good and the great".

Alex

10-07-2010, 09:29 PM

Statutory Management is, by definition and nature, a drastic measure. As such, it can turn out to be quite harmful if applied unjustifiably or inappropriately. It may be applied with a preventative purpose, in which case the justification of its applications can be obscure to the public for a period of time until a formal account for the said justification is published.
One should not jump to conclusions of impropriety until more information becomes available. Also, there has to be a substantial and effective recourse avenue for those who suffered the consequences of an inappropriate imposition of statutory management.
The arrangement becomes considerably more complex when a business acquires government backing (RDGS). As the owner of the business, you’d like to retain all the freedoms, including the freedom of acting as risky as you see fit, that you had before the Guarantee was granted; can such expectation be considered realistic? – I think not. As I said in one of my previous posts, the guarantee surely comes with strings attached. In particular, risks that otherwise would have been limited to SCF and its investors, become “public” risks with the Guarantee. It is a conjecture only, but I can’t help thinking that AH’s being a major shareholder in SCF (a government guaranteed company) has been at least part of the reason to invoke statutory management.
Finally, there’s the engagement of the SFO. For AH’s sake, I hope this was unnecessary. For democracy’s and lawfulness' sake, I hope it was justified.
Time will tell.

COLIN

10-07-2010, 10:48 PM

It is a conjecture only, but I can’t help thinking that AH’s being a major shareholder in SCF (a government guaranteed company) has been at least part of the reason to invoke statutory management.
And that is one of my major "beefs" Alex - how could the relative Government agencies honestly believe that they were making a credible statement when they declared publicly that "South Canterbury Finance is not affected!" As we all know, irrespective of the final outcomes of the Statutory Management and the SFO probe, the consequences for SCF have all the potential to be quite drastic now, with the steady flow of new debenture moneys and rollovers likely to be heavily curtailed. Sure, SCF had major hurdles to overcome before these events took place, but they were well on track to stabilise the ship and re-set its course. There can be no doubt, whatsoever, that that task has now been made incredibly difficult.

Balance

11-07-2010, 09:18 AM

And that is one of my major "beefs" Alex - how could the relative Government agencies honestly believe that they were making a credible statement when they declared publicly that "South Canterbury Finance is not affected!" As we all know, irrespective of the final outcomes of the Statutory Management and the SFO probe, the consequences for SCF have all the potential to be quite drastic now, with the steady flow of new debenture moneys and rollovers likely to be heavily curtailed. Sure, SCF had major hurdles to overcome before these events took place, but they were well on track to stabilise the ship and re-set its course. There can be no doubt, whatsoever, that that task has now been made incredibly difficult.

So typical of trying to make a mountain out of an ant-hill - 'SCF is not affected" meant that SCF is not put into SM.

Of course SCF is affected - all the more reason why putting AH and associated entities into SM was NOT a decision taken lightly.

Heads will roll if AH is found to have been victimised by said government agencies - of that, there is no doubt.

percy

11-07-2010, 09:32 AM

winner69

11-07-2010, 10:02 AM

....... What I cannot understand is why Sandy Mairer has not sold anything.Talk of Scales,Helicopters being sold by Southerby,but I would have thought SCF would have sold off bits.........

Maybe you have just answered your own question as to why AH (and the missus and cat) were put into Stst Man .... think about it

Balance

11-07-2010, 10:04 AM

I have just looked up www.dairyholdings.co.nz wed site.What a huge operation.
As a side.Everytime I have had financial problems I have had to sell investments.The good ones have sold and I have had to rebuild with leftovers.What I cannot understand is why Sandy Mairer has not sold anything.Talk of Scales,Helicopters being sold by Southerby,but I would have thought SCF would have sold off bits.Makes me wonder if there are buyers talking to SM.In the same breath G Kerr raised what $270mil for PGC and over $150 mil for Torchlight.Total $420mil.He did not seem to have too much trouble raising this,so there must be another $400mil somewhere looking for a nice home?I may be wrong but that would seem to be the amount that is needed to recapitalise SCF.

Sandy's game plan will become clear for all soon enough. There is no need to sell assets.

Meanwhile, I think this is a good summary of how the SM of AH should be viewed :

"The Securities Commission and the Companies Office have set a new bar here by ignoring the emotions that must have surrounded placing the affairs of Mr Hubbard, who is considered by many as a great New Zealander, into statutory management.

By taking this action they have put the entire securities market on notice. However, they have also placed themselves on notice. The various regulators are now on the largest stage under the brightest spot-light.

The public will not tolerate ANY future weakness in monitoring or actions taken to protect the investing public. They clearly believe that if the Securities Commission places Allan Hubbard's 'head on a pole' then many others belong on the same poles.

Public anger will grow very quickly if others, suspected by all to have misbehaved, are not caught in the regulators net. Where were the statutory managers for the long list of other poor performers? (Blue Chip, Bridgecorp, Capital + Merchant, Five Star, Dominion Finance, etc)

The Minister of Commerce recognises this situation and is probably quietly pleased about the evolution of his departments and this new level of responsibility.

The regulators have been using very carefully worded public statements, upon which they will now be judged.

Everyone is watching, very closely."

Enumerate

11-07-2010, 10:15 AM

What I cannot understand is why Sandy Mairer has not sold anything.

If you read the half year accounts and the various prospectus releases - I think you can glean an insight into managements plans.

1) The most telling point, as I have mentioned before, is that the recently introduced equity assets (Scales, Helicopters) are not part of the charging group (although, since the shares are held by SCF, which is part of the charging group, these shares could be sold). This means that these equity asset units are to remain intact. It is also clear that these assets are non-strategic - they are simply there to bolster the balance sheet to satisfy the Trust Deed covenants.

2) The "shock loss" in the half year accounts (Dec 2009) almost wrote off the equity in SCF. We have had two announcements that recoveries of $200m and now $250m have been achieved since this date. We will get the full year accounts that reflect these better than expected recoveries and the infusion of the equity assets. I think the most likely outcome, for the full year accounts, is that recoveries will outstrip impairments by a significant margin. I think we will see the SCF balance sheet fully restored.

3) Full year, we will have a reported loss. The key point for me, is that this loss will be more than covered by the introduced equity assets.

4) The "super secured" Torchlight loan is more like bridging finance - to lubricate the wheels of the restructure.

5) The cash flow issues with the "wall of debt" are the key risk. An orderly downsize of SCF to a $1billion finance business would be the best outcome for everyone. I think this task is achievable if debenture roll overs and new investments hold up. (Remember, this is a business that is down sizing - ultimately, they do not need to borrow, in the future, as much as they have borrowed in the past).

6) An equity partner would be nice only if they can lend assistance with the "wall of maturities". An equity partner would allow Allan Hubbard to take back his equity assets (Scales, Helicopters, Dairy) as consideration for him selling down part of his SCF shareholding. I do not expect that a recapitalisation of SCF is needed (which may surprise a few people - but have they really looked at the numbers?). Only a restructuring is needed - replace equity assets with capital and sell off the "bad bank" on reasonable terms.

Of course, the situation will be revealed, in detail, when we get the full year accounts.

If I am "near the money" on this ... and a cash management solution can be found to the "wall of debt" issues ... then the SCFHA's will be worth $1 per unit and the listed bonds will trade at about 8%.

All the information is out there ... lots of you have accounting backgrounds ... you should either be able to pick holes in my assessment or you could stand to make a great deal of money through a number of well timed investments.

percy

11-07-2010, 10:23 AM

Maybe you have just answered your own question as to why AH (and the missus and cat) were put into Stst Man .... think about it

Yes.AH is a Magpie.In the book on Ron Brierly there was a bit where Bruce Hancox said he could not get RB to agree to sell anything, so when they were in trouble he just went ahead and sold anyhow.I have wondered if same at SCF or SM has buyers wanting the complete business.May be the related party deals meant SM hands were tied and Stat Man was only way to get control of saleable assets.

percy

11-07-2010, 10:26 AM

If you read the half year accounts and the various prospectus releases - I think you can glean an insight into managements plans.

1) The most telling point, as I have mentioned before, is that the recently introduced equity assets (Scales, Helicopters) are not part of the charging group (although, since the shares are held by SCF, which is part of the charging group, these shares could be sold). This means that these equity asset units are to remain intact. It is also clear that these assets are non-strategic - they are simply there to bolster the balance sheet to satisfy the Trust Deed covenants.

2) The "shock loss" in the half year accounts (Dec 2009) almost wrote off the equity in SCF. We have had two announcements that recoveries of $200m and now $250m have been achieved since this date. We will get the full year accounts that reflect these better than expected recoveries and the infusion of the equity assets. I think the most likely outcome, for the full year accounts, is that recoveries will outstrip impairments by a significant margin. I think we will see the SCF balance sheet fully restored.

3) Full year, we will have a reported loss. The key point for me, is that this loss will be more than covered by the introduced equity assets.

4) The "super secured" Torchlight loan is more like bridging finance - to lubricate the wheels of the restructure.

5) The cash flow issues with the "wall of debt" are the key risk. An orderly downsize of SCF to a $1billion finance business would be the best outcome for everyone. I think this task is achievable if debenture roll overs and new investments hold up. (Remember, this is a business that is down sizing - ultimately, they do not need to borrow, in the future, as much as they have borrowed in the past).

6) An equity partner would be nice only if they can lend assistance with the "wall of maturities". An equity partner would allow Allan Hubbard to take back his equity assets (Scales, Helicopters, Dairy) as consideration for him selling down part of his SCF shareholding. I do not expect that a recapitalisation of SCF is needed (which may surprise a few people - but have they really looked at the numbers?). Only a restructuring is needed - replace equity assets with capital and sell off the "bad bank" on reasonable terms.

Of course, the situation will be revealed, in detail, when we get the full year accounts.

If I am "near the money" on this ... and a cash management solution can be found to the "wall of debt" issues ... then the SCFHA's will be worth $1 per unit and the listed bonds will trade at about 8%.

All the information is out there ... lots of you have accounting backgrounds ... you should either be able to pick holes in my assessment or you could stand to make a great deal of money through a number of well timed investments.

Enumerate,
Thank you,Rereading your post the wall of debt does not seem so huge should either SCF downsize or new equity party is of substance.

Balance

11-07-2010, 10:49 AM

Enumerate,
Thank you,Rereading your post the wall of debt does not seem so huge should either SCF downsize or new equity party is of substance.

My reading - SCF is sitting on $500m odd of non-performing loans? That has to be refinanced by equity (yes, equity) before the SCFHA has any value.

Enumerate

11-07-2010, 10:57 AM

My reading - SCF is sitting on $500m odd of non-performing loans? That has to be refinanced by equity (yes, equity) before the SCFHA has any value.

Have you accounted for the post half year balance date introduction of Scales and Helicopters?

Have you accounted for the statements on recoveries (first $200m and now $250m)?

What effect would a downsizing of the loan book - ultimate target of $1b - have, from a $1.9b loan book?

I wonder how much cash is going to be spun out of all the restructuring efforts, made possible by the Torchlight bridging loan?

Really, how much equity is needed to support a $1b loan book (one the equity assets are gone and the "bad bank" resolved or disposed of?

Enumerate

11-07-2010, 11:28 AM

Rereading your post the wall of debt does not seem so huge should either SCF downsize or new equity party is of substance.

Percy, I wouldn't like to underestimate the risk with the "wall of debt". After all, it is quite possible to kill a profitable business with poor cashflow planning (many businesses fail or get into trouble when growing without proper cashflow management). However, SCF is a business with a clear understanding of the threat and obvious management attention to the issue.

In a nutshell, I see SCF as being more about a restructure than an equity refloat:

1) Both the equity assets and the "bad bank" assets will be disposed of

2) The core business will be downsized to a $1b loan book.

The existing SCF balance sheet has too much of the equity assets. Trading these, at a fair price, for cash would provide the cash needed to float the "good bank". Working through the "bad bank" assets is a job SCF can do - and hopefully yield above average recoveries. Selling the "bad bank" looks increasingly unlikely (with the recent appointments indicating SCF are hiring to work through these assets, internally). However, selling remains an option - but only as a stop gap measure to assist with the "wall of debt".

It is difficult to interpret the announcement about the recoveries. Are these bad assets that have turned good? What are the recoveries above the impairment rate estimated in December? However, it does seem that they are recovering more than estimated. This does tend to justify the maintenance of the tax loss as an asset - as recovery could be faster than many commentators expected.

Anyway ... I have put down on paper (ether?) what I think, and why. Do your own research! Make your own mind up!

Balance

11-07-2010, 01:12 PM

Percy, I wouldn't like to underestimate the risk with the "wall of debt". After all, it is quite possible to kill a profitable business with poor cashflow planning (many businesses fail or get into trouble when growing without proper cashflow management). However, SCF is a business with a clear understanding of the threat and obvious management attention to the issue.

In a nutshell, I see SCF as being more about a restructure than an equity refloat:

1) Both the equity assets and the "bad bank" assets will be disposed of

2) The core business will be downsized to a $1b loan book.

The existing SCF balance sheet has too much of the equity assets. Trading these, at a fair price, for cash would provide the cash needed to float the "good bank". Working through the "bad bank" assets is a job SCF can do - and hopefully yield above average recoveries. Selling the "bad bank" looks increasingly unlikely (with the recent appointments indicating SCF are hiring to work through these assets, internally). However, selling remains an option - but only as a stop gap measure to assist with the "wall of debt".

It is difficult to interpret the announcement about the recoveries. Are these bad assets that have turned good? What are the recoveries above the impairment rate estimated in December? However, it does seem that they are recovering more than estimated. This does tend to justify the maintenance of the tax loss as an asset - as recovery could be faster than many commentators expected.

Anyway ... I have put down on paper (ether?) what I think, and why. Do your own research! Make your own mind up!

Big difference between realisations and recoveries. SCF has spun so much bs in the last 3 years, everything has to be read carefully.

http://www.nzx.com/markets/NZDX/SCF010/announcements/3714045/Asset-realisations-net-SCF-more-than-200-million

SCF's good quality loans are being taken over and refinanced by the banks - that's my reading of the above.

So good assets are going to meet the wall of debenture redemptions - the poor quality and non-performing loans and assets remain.

Simplistically, illustration only :

$1.8b = $1b good assets + .8b poor assets

After realisation, $1.4b = $.6b good assets + .8b poor assets.

If it's recoveries, then $1.4b = $1b good assets + .4b poor assets.

Caviar versus mullet bait = realisation versus recoveries.

Enumerate

11-07-2010, 01:54 PM

Balance, this is what the press release says:

South Canterbury Finance Limited is making good progress to recover outstanding loans with realisations of $202 million achieved since 1 January 2010.

A significant proportion of the recoveries have been achieved by the specialist asset management team working to realise assets in the Company’s portfolio of non-core and non-performing loans.

Note my emphasis.

You go on to say ...

SCF's good quality loans are being taken over and refinanced by the banks - that's my reading of the above.

So good assets are going to meet the wall of debenture redemptions - the poor quality and non-performing loans and assets remain.

What don't you understand about "non-core" and "non-performing loans"?

How does this become "good quality loans" in your statement?

Good god, you are twisting simple clear statements of progress in reducing the "bad bank" loan book into some kind of terrible financial manipulation that will lead to oblivion.

I have really got to seriously doubt your "Balance". I think it is probably time for you to declare your reasons for being irrationally SCF-phobic.

Enumerate

11-07-2010, 02:01 PM

Enumerate - so you bought SCFHA's at 30c and now are getting desperate>? Thats the way your ramping looks buddy.

Smokin cubans, you are simply an idiot.

Because I consider it appropriate to disclose my interest - this allows everyone to understand any potential bias.

Because I clearly explain my reasoning and sketch the basis for my analysis - everyone can follow my logic, check my facts - and make up their own mind, as I always encoiurage them to do.

What do you add to the conversation? Nothing ... nothing at all.

Why do you waste our time ... unless you are an idiot. Q E D

Balance

11-07-2010, 02:04 PM

Balance, this is what the press release says:

Note my emphasis.

You go on to say ...

What don't you understand about "non-core" and "non-performing loans"?

How does this become "good quality loans" in your statement?

Good god, you are twisting simple clear statements of progress in reducing the "bad bank" loan book into some kind of terrible financial manipulation that will lead to oblivion.

I have really got to seriously doubt your "Balance". I think it is probably time for you to declare your reasons for being irrationally SCF-phobic.

There you go again, matey - taking SCF's pr release at face value. Anyone who has read and taken SCF's utterances at face value in the last 2 years has learnt that it is folly to do so.

Excerpt : "The asset recovery process has been helped by the renewed interest of trading banks in financing sound asset propositions which has further facilitated the sale and recovery process by South Canterbury Finance."

Emphasis on "sound asset propositions".

Meanwhile, have a read of this :

http://www.lostsoulblog.com/2010/06/underwater-and-sinking-scf-regulatory.html

Shudder!

Balance

11-07-2010, 02:19 PM

Smokin cubans, you are simply an idiot.

Because I consider it appropriate to disclose my interest - this allows everyone to understand any potential bias.

Because I clearly explain my reasoning and sketch the basis for my analysis - everyone can follow my logic, check my facts - and make up their own mind, as I always encoiurage them to do.

What do you add to the conversation? Nothing ... nothing at all.

Why do you waste our time ... unless you are an idiot. Q E D

I'm with you, Enumerate.

Enumerate

11-07-2010, 02:33 PM

There you go again, matey - taking SCF's pr release at face value. Anyone who has read and taken SCF's utterances at face value in the last 2 years has learnt that it is folly to do so.

The view I have taken, is as follows:

It is difficult to interpret the announcement about the recoveries. Are these bad assets that have turned good? What are the recoveries above the impairment rate estimated in December? However, it does seem that they are recovering more than estimated. This does tend to justify the maintenance of the tax loss as an asset - as recovery could be faster than many commentators expected.

I would suggest there is an appropriate degree of questioning, in my view, on what this all means. To me, the recovery value of the loans could still involve impairments. The realisation of the recovery value is actually getting payment at the recovered value.

Clearly, the key point of interest is: "Are the recovery values, being achieved, above the levels set at the time of the December half year?".

The press release, to me, implies that this may be the case.

This is a million miles away from: "We are realising good assets through external bank financing to meet our "wall of debt" obligations".

This is effectively the situation, you claim - but there is no statement of anything other than SCF moving to "recover outstanding loans". (While it is possible for a "good loan" to be an "outstanding loan" - it is much more likely to be a "non-core or non-performing loan" - as is stated in the press release.

The latest statement is:

Meanwhile, the excellent progress being made on asset recoveries by the Company accelerated through June with total recoveries now exceeding $256 million since the start of 2010.

“This is a significant achievement and a very useful contribution to liquidity to meet our ongoing funding requirements.”

Clearly, SCF needs to realise the non-core and non-performing loans. This seems to be happening. The full year will give us the full picture. I am betting that it will be no where as bleak as your assessment.

I will concede - there is room for doubt on all of this. We don't know the recovery above or below existing impairment budgets. There is wriggle room here ....

Balance

11-07-2010, 03:06 PM

I always have a good laugh when I read SCF's PR releases. I remember an S&P downgrade being described as S&P affirming SCF's ratings!

This is a good perspective on the "recoveries". BTW, lost soul has been deadly accurate to date with its assessment of the real situation with SCF's financial situation :

http://www.lostsoulblog.com/2010/05/sandy-maier-on-south-canterbury.html

POSSUM THE CAT

11-07-2010, 03:16 PM

Made very good money out of NZF float & their debentures but a quick look at SCF debenture prospectus around 04-05 and I would not touch with a barge pole supprised SCF is still in existence

Enumerate

11-07-2010, 06:12 PM

BTW, lost soul has been deadly accurate to date with its assessment of the real situation with SCF's financial situation :

How could lost soul be "deadly accurate" about SCF's financial position when Sandy Maier has not released any substantive data on either loan impairments, recoveries, new cash inflows or roll overs. It is not possible for anyone to be "accurate" - however, I think they are successful in terms of being "deadly" - as poison is "deadly".

Hilllary's discussion on capital adequacy is simply laughable. Not once does he estimate the size of the loan book - after reconstruction. How could you comment of capital adequacy - when you don't know the size of the business you are modelling?

Hillary's discussion on loan recoveries doesn't even cite the information presented in the press releases.

I think Hillary went to the Bernard Hickey school of financial analysis - if you throw enough mud, something will stick, somewhere. This is not "deadly accurate" - this is something different from that.

Why do Hillary and Hickey comment on something they so clearly do not understand. Don't they realise that the Trustee is managing some fairly stringent covenants on the equity and debt structures? As far as these gentlemen are concerned, the Trustee either does not exist or is incompetent. Neither has presented an analysis of the covenants - so I would question whether they understand anything that the Trustee is doing.

SCF is not an insolvent business. SCF is not a business with insufficient equity capitalisation.

SCF is a business with too much of it's equity capitalisation in the form of equity investments. SCF is a business downsizing, disposing and restructuring of portions of it's loan book. It is also facing cash management issues due to the profile of maturities on it's debt. Both these factors are huge risks - they are not, necessarily, unsolvable.

From an investor perspective - Hillary and Hickey are simply poisonous. They cannot construct a feasible analysis of SCF because, like frightened school girls, they run off chasing the first bit of financial "scandal" they get a whiff of. Neither of these commentators seem to understand the timetable of events, the role of the trustee in setting this timetable. Where is the analysis of what the ratings agency thinks? Both of them have not grasped the fundamental structural elements of restructure - the "good bank", the "bad bank" and "equity investments" - because they never present their analysis with these structural divisions. Why not publish their view of the 31 August balance sheet - this would lead to a very interesting shaping and focusing of the SCF discussion?

Lost souls has about as much credibility as predicting a 30% reduction in house prices ... say.

Beagle

11-07-2010, 07:55 PM

How could lost soul be "deadly accurate" about SCF's financial position when Sandy Maier has not released any substantive data on either loan impairments, recoveries, new cash inflows or roll overs. It is not possible for anyone to be "accurate" - however, I think they are successful in terms of being "deadly" - as poison is "deadly".

Hilllary's discussion on capital adequacy is simply laughable. Not once does he estimate the size of the loan book - after reconstruction. How could you comment of capital adequacy - when you don't know the size of the business you are modelling?

Hillary's discussion on loan recoveries doesn't even cite the information presented in the press releases.

I think Hillary went to the Bernard Hickey school of financial analysis - if you throw enough mud, something will stick, somewhere. This is not "deadly accurate" - this is something different from that.

Why do Hillary and Hickey comment on something they so clearly do not understand. Don't they realise that the Trustee is managing some fairly stringent covenants on the equity and debt structures? As far as these gentlemen are concerned, the Trustee either does not exist or is incompetent. Neither has presented an analysis of the covenants - so I would question whether they understand anything that the Trustee is doing.

SCF is not an insolvent business. SCF is not a business with insufficient equity capitalisation.

SCF is a business with too much of it's equity capitalisation in the form of equity investments. SCF is a business downsizing, disposing and restructuring of portions of it's loan book. It is also facing cash management issues due to the profile of maturities on it's debt. Both these factors are huge risks - they are not, necessarily, unsolvable.

From an investor perspective - Hillary and Hickey are simply poisonous. They cannot construct a feasible analysis of SCF because, like frightened school girls, they run off chasing the first bit of financial "scandal" they get a whiff of. Neither of these commentators seem to understand the timetable of events, the role of the trustee in setting this timetable. Where is the analysis of what the ratings agency thinks? Both of them have not grasped the fundamental structural elements of restructure - the "good bank", the "bad bank" and "equity investments" - because they never present their analysis with these structural divisions. Why not publish their view of the 31 August balance sheet - this would lead to a very interesting shaping and focusing of the SCF discussion?

Lost souls has about as much credibility as predicting a 30% reduction in house prices ... say.

Can't agree with you on that one Enumerate.

I think David Hillary has a pretty good handle on the situation, i've read most of what he's had to say about SCF and a heck of a lot of it makes very good common sense and I think he's done a good and thorough analysis of what information is in the public domain.

I don't want to get in the way of such a comprehensive debate you and Balance are having on the SM issue BUT, here's what I know and can add to the debate:-

The original complainant made their complaint on 28 February 2010 and we know the the National Enforcement guys, (the front line grunts who do the hard yards, if you like) from the Companies office undertook a thorough investigation in the period from, one presumes just after the complaint until, upon their recommendation and based on their investigation, the SFO became involved and SM effective.

Now it so happens that I've met those guys on another finance company matter and I can attest that they're straight-shooter hard working types who do a very thorough job. If they're recommending the course of action they did, there's serious trouble within Aorangi Securities, in my humble opinion.

Back to the preference share issue and recoveries. I'd have to say SCF have a demonstrated track record of extremly creative accounting and press releases and when they say "recoveries", they're not talking about recovery over and above the written-down book value of receiveables, they're simply saying they've recovered a certain amount of money from the receiveables book, it could be at book value, or significantly below, or just possibly slightly above. When you consider that SCF are carrying well north of $100m of tax assets that simply shouldn't be there by any stretch of the accounting standards, questionable valuation for equity from Scales and Helicopters N.Z., (Forsyth Barr tried for months to sell these or float them on the market and couldn't), $500m of established deliquent receiveables as at 31 December 2009 and no doubt many new deliquencies due to the difficult economic conditions I was referring too on Friday, I can't help but wonder if in the full light of day after a thorough further round of independent provisioning by the Auditiors, whether there's any real equity in the company as at 30 June 2010 ?

I know that's not what you want to hear but its what I think. Disclosure of Interest, I don't own any SCF preference shares or have any other investment with them but I'm mighty glad my debenture investment matured in May and I got my six figure sum back in full.

temuk

11-07-2010, 08:58 PM

A small article in the Timaru Herald yesterday said Lachie Mcleod has paid back his $15m (last november),and
"A smaller $750,000 loan was also made to then director Ed Sullivan but yesterday he could not be reached for
comment."

COLIN

11-07-2010, 10:01 PM

So typical of trying to make a mountain out of an ant-hill - 'SCF is not affected" meant that SCF is not put into SM.

Of course SCF is affected - all the more reason why putting AH and associated entities into SM was NOT a decision taken lightly.

I guess that many mountains could look like ant hills if viewed through the wrong end of a telescope.

The simple fact of the matter is that the practical effect of placing the Hubbards, personally, into Statutory Management is to also place SCF into SM - i.e. de facto if not de jure - because AH is (was?) the controlling, and virtually the sole, shareholder. (You even use the term "associated entities" yourself.) Now, all power to take any action in respect of that controlling interest has been taken away from him. So, why beat about the bush and not include SCF in the official line-up. Some might see this as a "minor" point; I certainly don't.

Of course, you may well retort that Sandy Maier is effectively fulfilling the role of a Statutory Manager at SCF, so why replace him with another similar process?; if you are happy with this situation then why do you scoff at the contents of his recent press releases? You can't have it both ways.

Balance

11-07-2010, 10:52 PM

I guess that many mountains could look like ant hills if viewed through the wrong end of a telescope.

The simple fact of the matter is that the practical effect of placing the Hubbards, personally, into Statutory Management is to also place SCF into SM - i.e. de facto if not de jure - because AH is (was?) the controlling, and virtually the sole, shareholder. (You even use the term "associated entities" yourself.) Now, all power to take any action in respect of that controlling interest has been taken away from him. So, why beat about the bush and not include SCF in the official line-up. Some might see this as a "minor" point; I certainly don't.

Of course, you may well retort that Sandy Maier is effectively fulfilling the role of a Statutory Manager at SCF, so why replace him with another similar process?; if you are happy with this situation then why do you scoff at the contents of his recent press releases? You can't have it both ways.

If SCF goes into SM, the Crown guarantee kicks in and the govt is in for a bath (actually it's us taxpayers) - that's why it's preferable at this stage for it to be managed by Sandy Maier.

I scoff at all of SCF's press releases - not just Sandy Maier's - they are creative works of art.

Enumerate

12-07-2010, 08:14 AM

SCF seems to inspire such depth of feeling that even non-holders and never-will-be-holders seem to want to express an opinion.

Usually, I only follow a thread where I have some interest in investing. I usually only contribute when I am active in analysis.

It is unfortunate that the opinions often expressed by the non-holders are regurgitations of David Hillary's blogiarrhea.

It is like "attack of the Hillary zombies". You can put a wooden spike and a silver bullet into his "analysis" - and someone else surfaces on the thread saying what a compelling argument he makes. If I have to deal with Hillary delusions - maybe I should just cross reference my posts - I can effectively deal with the nonsense with a series of footnotes.

Sheesh guys - if the sight of someone posting a case for investing in SCFHAs hurts your eyes - look somewhere else.

There are alot of interesting points being made on this thread. As far as dealing with available public information on SCF is concerned - I think COLIN is making some very clear points. The effective statutory management of SCF is something we have not fully explored (Hubbard is in stat mgmnt - controls - Southbury - controls - SCF).

All the accounting issues will be resolved with the full year accounts - and a new set of fights will begin.

The SCF governance and Allan Hubbard personal liberty issues are just as serious but will not be so easily resolved (nor forgotten),

Balance

12-07-2010, 10:25 AM

On the contrary, Enumerate.

Hillary has attempted to pull SCF's PR releases apart to get at the truth.

Others choose to simply take SCF's words - and SCF has been proven wrong, wrong and wrong - time and again. Heck, their financial statements have been revised so many times it's a wonder thy can get an auditor's sign-off.

Oh, but I forget - SCF had some Timaru audit firm sign-off their accounts !!!!!!!!

Accept their utterances at your peril - as many have.

Enumerate

12-07-2010, 10:28 AM

... and SCF has been proven wrong, wrong and wrong - time and again.

Can you give us some examples of when Maier has lead us astray ...

Alan3285

12-07-2010, 10:50 AM

Heck, their financial statements have been revised so many times it's a wonder thy can get an auditor's sign-off.

Oh, but I forget - SCF had some Timaru audit firm sign-off their accounts !!!!!!!!

Accept their utterances at your peril - as many have.

I think you'll find that their auditors are Ernst & Young (at least according to the NZX):

http://www.nzx.com/markets/NZDX/SCFHA

Alan.

Balance

12-07-2010, 11:04 AM

I think you'll find that their auditors are Ernst & Young (at least according to the NZX):

http://www.nzx.com/markets/NZDX/SCFHA

Alan.

Was Woodnorth Myers until Nov 2009. Ever heard of them?

A $2 billion finance company with the complexities of spider-web tangled with barb-wire being audited by a small regional audit firm? Nice one.

Excerpt : "If Dame Ngaio Marsh were to put a title to the saga of finance company collapses, it might be the Mystery of the Disappearing Millions. The players have run to management, directors, trustees and regulators, but a fifth group, auditors, is coming under increasing scrutiny.

On Monday, South Canterbury Finance revealed it had restated its accounts for last year, changing the reported loss of $57.8 million to a loss of $163m – a difference of $105m. The restatement came after South Canterbury's long-term auditor, Woodnorth Myers, a small firm based in Timaru, was replaced by big four firm Ernst & Young.

South Canterbury's new chief executive Sandy Maier indicated Woodnorth Myers stepped aside after a "peer review" by Ernst & Young. "Generally speaking, for a company the size of South Canterbury, the new independent directors felt a big four national or international auditor would be more appropriate. The previous auditors were local, regional guys in Timaru, which was physically convenient, but probably wasn't a good match for a firm of this size."

Balance

12-07-2010, 11:10 AM

Can you give us some examples of when Maier has lead us astray ...

Try the equity injections from Torchlight fund - were they really capital injection as asserted (big vote of confidence it was to by outside investors - trumpeted the PR release) or something else?

I have another gem for you but wait your response to above first.

Sandy is a lawyer - one of the smoothest operator you could get so you have to read what he does not say - not what he says.

Beagle

12-07-2010, 11:18 AM

I think you'll find that their auditors are Ernst & Young (at least according to the NZX):

http://www.nzx.com/markets/NZDX/SCFHA

Alan.

They of course were done by a Timaru firm until very recently. I've been an accountant for 30 years and i've never seen the number of profoundly material adjustments undertaken in SCF's accounts before.

What's truly remarkable about the GFC and its affects on finance companies in N.Z. in particular, is investors propensity to rather than face the truth, try and live in denial. They simply want to be like an Ostrich and stick their head in the sand because it hurts too much to face the awful truth. This simple but irrational human weakness has been the major reason why so many extremly poor moratoriums have seen the light of day and been approved by hapless, uninformed and often mis-guided investors.

To some extent I see this irrational behaviour with SCF. Even the Auditors, before the wall of maturities became so problematic with the recent appointment of SM's to Hubbards interests, qualified their audit report with concerns regarding going concern, amoung other things.

Debenture roll-overs and what scant new investment might come to the company in the next few months have virtually no chance of enabling SCF to climb the wall, in my opinion, so the pref shares only have some value if the Govt or some other party comes to their assistance and with on-going systemic issues with the "world class" loan book written by the legendary Lachlie McLeod continuing to seep out of the wood-work, what chance the company actually making any money in the next few years and having some validation for carrying well north of $100m in tax losses as an asset on their balance sheet ?

Balance

12-07-2010, 11:26 AM

I asked the question - has anyone here supporting AH actually seen an AH deal. No reply so far.

Well, how about this one?

http://www.lostsoulblog.com/2010/07/lachie-mcleods-settlement.html

Nice deal if it is true - notice there has been no denial or comment from SCF.

What a sweet deal!

Deal looks like - SCF lends last CEO $15m to put into Southbury (AH's principal company) secured by shares in Southbury. If Southbury goes up in value, last CEO keeps the upside. If Southbury value drops, he does not have to pay the difference!

AH supporters would of course argue that SCF is AH's company so he can do what he likes, right?

Caviar, anyone?

Alan3285

12-07-2010, 11:31 AM

Was Woodnorth Myers until Nov 2009. Ever heard of them?

I suppose if you are more interested in the financials from 30 Jun 2009 and earlier then you have a point, but most investors will be looking at more recent information I suspect.

Alan.

Balance

12-07-2010, 11:40 AM

I suppose if you are more interested in the financials from 30 Jun 2009 and earlier then you have a point, but most investors will be looking at more recent information I suspect.

Alan.

Not at all - how the company was audited in the past has a huge bearing on the state of the books going forward.

How many more skeletons to come out of the cupboard?

Remember we taxpayers are day by day being 'forced' to pay out on redeeming debentures. You feeling happy?

Enumerate

12-07-2010, 11:42 AM

Try the equity injections from Torchlight fund - were they really capital injection as asserted (big vote of confidence it was to by outside investors - trumpeted the PR release) or something else?

The Torchlight investment of up to a $100m line of credit is actually quite simple. It is simply a secured line of credit.

It is not equity. There was the talk of issuing convertible notes - this never happened due to the fact that a complex equity/debt deal did not attract the support of Treasury.

Torchlight have never been lined up to recapitalise SCF. The introduction of the equity assets (Scales and Helicopters) was the equity injection. As far as I can understand, Torchlight have been in line to take out some of the "bad bank" assets. It looks like managing the "bad bank" recoveries is being done, inhouse to SCF, with Torchlight finance as a kind of "bridging loan".

I see a change of plan - but I cannot see any deception.

I can't imagine that even David Hillary couild criticise - after all the United States Private Placement facility that was repaid, early, in February, was a similar senior loan to the Torchlight loan. Clearly the debenture Trustee is happy with this deal - I believe the covenants allow the company to take a senior loan of this magnitude.

Next example, please.

Balance

12-07-2010, 11:50 AM

The Torchlight investment of up to a $100m line of credit is actually quite simple. It is simply a secured line of credit.

It is not equity. There was the talk of issuing convertible notes - this never happened due to the fact that a complex equity/debt deal did not attract the support of Treasury.

Torchlight have never been lined up to recapitalise SCF. The introduction of the equity assets (Scales and Helicopters) was the equity injection. As far as I can understand, Torchlight have been in line to take out some of the "bad bank" assets. It looks like managing the "bad bank" recoveries is being done, inhouse to SCF, with Torchlight finance as a kind of "bridging loan".

I see a change of plan - but I cannot see any deception.

I can't imagine that even David Hillary couild criticise - after all the United States Private Placement facility that was repaid, early, in February, was a similar senior loan to the Torchlight loan. Clearly the debenture Trustee is happy with this deal - I believe the covenants allow the company to take a senior loan of this magnitude.

Next example, please.

You are so wrong!

No - SCF asserted Torchlight injection was equity. http://www.voxy.co.nz/business/additional-equity-south-canterbury-finance/5/43743

It was not. It was secured debt funding - something that Torchlight is very proud of, right from day 1.

There is a gigantic difference between capital/equity and secured debt funding.

Remember SM was appointed in Nov 2009. The statement was made in March 2010.

I will keep my other gem for later use.

Alan3285

12-07-2010, 12:51 PM

I suppose if you are more interested in the financials from 30 Jun 2009 and earlier then you have a point, but most investors will be looking at more recent information I suspect.Not at all - how the company was audited in the past has a huge bearing on the state of the books going forward.

I had no idea that the accounts, and perhaps most significantly from your statement, the balance sheet, signed off by Ernst & Young as at 31 Dec 2009 were materially mistated.

If so, that puts things in a different perspective.

How many more skeletons to come out of the cupboard?

Remember we taxpayers are day by day being 'forced' to pay out on redeeming debentures. You feeling happy?

I didn't know that the govt has already started paying out on SCF debentures. When did that start?

What was the default event that triggered the pay outs?

Thanks,

Alan.

Enumerate

12-07-2010, 01:25 PM

You are so wrong!

No, Balance ... I am so right!

http://www.nzx.com/markets/NZDX/SCF010/announcements/3778100/Torchlight-increases-funding-for-South-Canterbury-Finance

The increase in the amount of the funding facility to $100 million replaces the previous agreement between Southbury Corporation Limited and Torchlight Fund No 1 LP for an additional equity injection of up to $37.5 million which is not now proceeding. The Trustee has granted South Canterbury Finance a further waiver, subject to certain conditions, from compliance with the risk weighted asset covenant in clause 16.1(c) of the Trust Deed which will expire on 31 August 2010.

Your convertable note deal was not agreed by Treasury, apparently. The structure of the deal that replaced this prior agreement with Torchlight is a senior debt position, as I indicated.

Time to show us the "gem" ...

Balance

12-07-2010, 01:39 PM

No, Balance ... I am so right!

http://www.nzx.com/markets/NZDX/SCF010/announcements/3778100/Torchlight-increases-funding-for-South-Canterbury-Finance

Your convertable note deal was not agreed by Treasury, apparently. The structure of the deal that replaced this prior agreement with Torchlight is a senior debt position, as I indicated.

Time to show us the "gem" ...

The fact that Treasury did not approve the deal does NOT change the fact that SCF asserted a capital injection from Torchlight - when it was not capital. How easily are some people fooled by SCF!

Enumerate

12-07-2010, 01:50 PM

The fact that Treasury did not approve the deal does NOT change the fact that SCF asserted a capital injection from Torchlight - when it was not capital. How easily are some people fooled by SCF!

No, no, no ... Balance.

The convertable note deal could easily have been treated as an equity injection ... depending on the terms of the Trust Deed.

A clear example of this "dual nature" is the Prefs. They are treated like equity - but in a wind up situation - they become subordinated debt. The convertable notes are kind of reverse - they are treated as debt and may possibly (Trust Deed T's & C's) reduce to equity when they become due. From the viewpoint of the debenture trustee - I am sure he would view the convertable notes as equity.

Anyway - it doesn't matter. The deal with Torchlight was announced ... but never enacted. A much simpler structure was put in place.

Lets focus on what did happen, and the implications of this. We are all here as investors, after all.

If you don't want to make your "gem" public - you can pm me, if you like. After all, this is much more than an idle debate - this is a crusade for the TRUTH.

minimoke

12-07-2010, 02:21 PM

No, Balance ... I am so right!

http://www.nzx.com/markets/NZDX/SCF010/announcements/3778100/Torchlight-increases-funding-for-South-Canterbury-Finance

If I may pop in for a moment.

If we look at this announcement (https://www.directbroking.co.nz/DirectTrade/dynamic/announcement.aspx?id=2478157) SCF is clearly announcing to the market it is getting an additional sum of "equity". Surely investors should be able to rely on this announcement and take from it that it was an "equity' injection" rather than anything else. If its not equity then its a misleading announcement and SCF ought to make a subsequent announcement retracting it.

And if we look at the date of that announcement, it was also the date on which the market was advised SCF was late with issuing its Interim report,. This report arrived 9 days late to the market - during which time punters probably thought there had been an equity injection. Any nervousness Moms and Pops might have had about rolling ether cash back into SCF (due to the late report) may well have been counters by the news that someone was prepared to pump substantial equity into what was being reported as a markedly improving company.

minimoke

12-07-2010, 02:37 PM

Balance

12-07-2010, 02:50 PM

If I may pop in for a moment.

If we look at this announcement (https://www.directbroking.co.nz/DirectTrade/dynamic/announcement.aspx?id=2478157) SCF is clearly announcing to the market it is getting an additional sum of "equity". Surely investors should be able to rely on this announcement and take from it that it was an "equity' injection" rather than anything else. If its not equity then its a misleading announcement and SCF ought to make a subsequent announcement retracting it.

And if we look at the date of that announcement, it was also the date on which the market was advised SCF was late with issuing its Interim report,. This report arrived 9 days late to the market - during which time punters probably thought there had been an equity injection. Any nervousness Moms and Pops might have had about rolling ether cash back into SCF (due to the late report) may well have been counters by the news that someone was prepared to pump substantial equity into what was being reported as a markedly improving company.

Precisely.

winner69

12-07-2010, 03:00 PM

Enumerate

12-07-2010, 03:26 PM

Surely investors should be able to rely on this announcement and take from it that it was an "equity' injection" rather than anything else. If its not equity then its a misleading announcement and SCF ought to make a subsequent announcement retracting it.

But they did ... I posted the NZX copy of the announcement.

Beagle

12-07-2010, 03:32 PM

Jeez ... if you guys are sll mixed up and cant really agree what was and waht wasn't said about this injection of equity or cash who can

All what both Emunerate and Balance have satted was the basis of Shoeshines column in the NBR of June 11 where he used the word 'deception' that some on this thread disliked ... recall he was also on about the similarities with Lehman Bros etc ... (quote Shoeshine) Lehman fuelled this perception further by stringing the market along, initially with overly optimistic earnings reports and later with forlorn attempts to raise capital. Those attempts turned out to be wishful thinking. Perception or deception?(end quote)

You should try to get a copy of that NBR

No doubt in my mind that SCF were stretching the truth too far with this Torchlight equity/loan saga to keep confidence with their investors.

No doubt in my mind either. Equity is not real equity if its directly funded by extrapolating the prior ranking super-senior debt out as far as is possible under the trust deed.

Lets get real, AH was not able to inject a meaningful amount of real cash equity into the company in recent times because he seems to have a well developed love of high leverage. Forsyth Barr have tried for months to arrange a significant and meaningful real cash equity injection and failed. Forsyth Barr tried for months to sell or float Helicopters N.Z. to the market and failed.

There's simply too many loan skeletons in the closet, I can only imagine trying to do due diligence on SCF, it would take a team of skilled forensic accountants several months, at very best to do a thorough job.

Why would any interested party buy now when its increasingly obvious they could pick up the peices from the Govt much cheaper in due course ?

Beagle

12-07-2010, 03:37 PM

But they did ... I posted the NZX copy of the announcement.

I think the point is they tried to B.S. the market in the first place, and not just the once, and only fessed-up when Treasury declined to accept the transaction.

minimoke

12-07-2010, 03:38 PM

Alex

12-07-2010, 03:50 PM

I might just drag the conversation back to the matter of the Govt Guarantee - and risk.
Today its reported that a couple are still waiting for a June End interest Payment from Aorangi Investments - just a mere $23 - $24, 000. But the payment is two weeks late and they rely on those interest payments for their ongoing commitments as its a major part of their income. The Managers are silent and can't be contacted and it appears unlikely that a payment will be made in July. And people in SCF reckon they'll get their money in 14 days!

Investors in Aorangi do not have the Govt Guarantee. Eligible investors in some of the SCF's instruments (e.g., secured debentures) do have the Guarantee cover until 31-Dec-2011. Extrapolating what's happening with Aorangi investments onto what might happen with SCF investments does not make sense.

Enumerate

12-07-2010, 03:52 PM

No doubt in my mind that SCF were stretching the truth too far with this Torchlight equity/loan saga to keep confidence with their investors.

This is drawing a long bow ....

The deal was killed, for some reason. Treasury is taking the blame - but I wonder - this clearly does not make sense.

Look at the following register changes since Allan Hubbard went into Statutory Management and ceased to be a Director of Southbury.

Can you spot anything of interest? Well, I reckon that Allan could have been put into Statutory Management because he was still hanging onto Scales and Helicopters through some mechanism - rather than handing over the full equity control, as promised, when the government guarantee was negotiated. Here we have the Statutory Manager completing the letter of the agreement on the 7th and 8th of July.

The Torchlight issue is simply a minor version of what was to become a major issue. Maybe Allan agreed to the Torchlight equity deal - but, like with Scales and Helicopters, could not bring himself to execute.

What do you think?

1) South Canterbury Finance
07 July 2010
Previous Number of Shares:
276400000
Increased Shares by:
317708333
New Number of Shares:
594108333

Details of Issue
Type of Change:
Issue

SOUTHBURY CORPORATION LIMITED( 2328706 )
Previous:
156400000 Shares
Updated:
474108333 Shares

2) South Canterbury Finance
08 July 2010
Previous Number of Shares:
594108333
Decreased Shares by:
317708333
New Number of Shares:
276400000

Details of Acquisition
Type of Change:
Acquisition

SOUTHBURY CORPORATION LIMITED( 2328706 )
Previous:
474108333 Shares
Updated:
156400000 Shares

3) South Canterbury Finance
08 July 2010
Previous Number of Shares:
276400000
Increased Shares by:
317708333
New Number of Shares:
594108333

Details of Issue
Type of Change:
Issue

SOUTHBURY CORPORATION LIMITED( 2328706 )
Previous:
156400000 Shares
Updated:
474108333 Shares

Alan3285

12-07-2010, 03:54 PM

I might just drag the conversation back to the matter of the Govt Guarantee - and risk.
Today its reported that a couple are still waiting for a June End interest Payment from Aorangi Investments - just a mere $23 - $24, 000. But the payment is two weeks late and they rely on those interest payments for their ongoing commitments as its a major part of their income. The Managers are silent and can't be contacted and it appears unlikely that a payment will be made in July.

That'll be due to the Stat Mgt - Not only have they failed to demonstrate that they followed due-process, they are also now impacting on investors that have never had a late interest payment before.

people in SCF reckon they'll get their money in 14 days

{Sigh}

That was thoroughly debunked up above a couple of weeks ago - as I said to Balance, who seems not to want to listen either, you are dreaming if you think you are getting your cash back in 14 days.

You best be prepared to wait at least 12 weeks, and if you haven't got all your own documentation in order, then it might take longer than that.

Alan.

minimoke

12-07-2010, 03:59 PM

But they did ... I posted the NZX copy of the announcement.

Sorry I should have been more clear. When I talk about a retraction, I meant a retraction immediately the error had come to light - not over a month later. Like politics, a month is a hell of a long time in the life of an SCF investor. The original announcement is clearly misleading and was made at a time SCF was desperate to get people to being rolling their cash back into SCF. And we are expected to trust what SCF says to the market?

Enumerate

12-07-2010, 04:03 PM

Sorry I should have been more clear. When I talk about a retraction, I meant a retraction immediately the error had come to light - not over a month later.

Well, maybe everyone thought they had a deal ... and when it came time for Allan to execute ... he turned into a magpie and wouldn't let go.

Maybe this also happened with Scales and Helicopters ...

The equity deals were pretty critical to the S&P rating and subsequent government guarantee. Maybe Allan completely put a spanner in the works - much to everyone's embarrassment.

Maybe the Companies Office was following up on why the transactions never were filed? Maybe that is how Allan Hubbard ended up in Statutory Management?

minimoke

12-07-2010, 04:08 PM

{Sigh}

That was thoroughly debunked up above a couple of weeks ago - as I said to Balance, who seems not to want to listen either, you are dreaming if you think you are getting your cash back in 14 days.
Alan.
You don't have to convince me - I reckon you'l be lucky to see your money in six months and I wouldn't be surprised if it was 12 months.

But my point being that the if we think unraveling a little thing like Aorangi is going to hold back repayments just imagine what unraveling SCf will be like to determine a persons eligibility and amounts due. SCF prospectus refers to you getting your money back in 14 days - that is another misleading statement.

minimoke

12-07-2010, 04:12 PM

Well, maybe everyone thought they had a deal ... and when it came time for Allan to execute ... he turned into a magpie and wouldn't let go.

Maybe this also happened with Scales and Helicopters ...

The equity deals were pretty critical to the S&P rating and subsequent government guarantee. Maybe Allan completely put a spanner in the works - much to everyone's embarrassment.

Maybe the Companies Office was following up on why the transactions never were filed? Maybe that is how Allan Hubbard ended up in Statutory Management?

Yes , lots of maybe's. Now if SCF had made an announcement that said: "Maybe There's Additional Equity for South Canterbury Finance" we might have more confidence in what they say.

12-07-2010, 04:14 PM

Today its reported that a couple are still waiting for a June End interest Payment from Aorangi Investments - just a mere $23 - $24, 000. But the payment is two weeks late Surely that is the SM fault. The fact they haven't paid it must suggest they are concerned there is not enough cash?

Enumerate

12-07-2010, 04:17 PM

Surely that is the SM fault. The fact they haven't paid it must suggest they are concerned there is not enough cash?

No - the SM announced that all payments are frozen.

minimoke

12-07-2010, 04:36 PM

Surely that is the SM fault. The fact they haven't paid it must suggest they are concerned there is not enough cash?
Its not that there isn't enough cash. Its just the SM's don't know who it belongs to or where it the $98m has precisely gone - other than it appears to have gone to interests and Trusts associated with AH. The SM's are sending a letter out to investors this week asking them about their investments.

winner69

12-07-2010, 04:37 PM

minimoke

12-07-2010, 04:42 PM

Investors in Aorangi do not have the Govt Guarantee.
They sure don't. But they might be a bit miffed if its discovered that their money has actually found its way to SCf without the benefit of the Guarantee.

Balance

12-07-2010, 05:02 PM

They sure don't. But they might be a bit miffed if its discovered that their money has actually found its way to SCf without the benefit of the Guarantee.

You, my insightful friend, may have just hit the nail on the head!

mouse

12-07-2010, 05:22 PM

I am sending links to this saga, using these posts, to two of my Granddaughters every so often. They can watch a Company perform a miraculous recovery. Or much more likely, watch it slowly expire. Receivership being the ultimate destination. Whatever happens, they will get the feel of money problems and what can happen to our best plans.
Any other improving lessons to be had from The Market? Exclude Pike. That is not an improving lesson!

winner69

12-07-2010, 05:27 PM

You, my insightful friend, may have just hit the nail on the head!

There was also those reports of AH transferring cash into the charities he wanted to have his cash when he left this world .... all of sudden a few months ago

Beagle

12-07-2010, 05:28 PM

Yes the greatest lesson in recent times is we should all have a "Paul the Octopus" to conduct our visionary thinking. I want it to run an investment company as its clearly able to outpick almost any skilled fund manager in the world, where do I invest ?

winner69

13-07-2010, 10:21 AM

And as an aside,if Lochie has paid back his $15m I wonder where that money came from.

That lostsoul guy points out that it still seemed to show in the accounts as at December so was wondering how could it have been paid back in November .... but then pointed out that Lachie only 'settled' .... which does not necessary mean 'pay'

minimoke

13-07-2010, 10:24 AM

That lostsoul guy points out that it still seemed to show in the accounts as at December so was wondering how could it have been paid back in November .... but then pointed out that Lachie only 'settled' .... which does not necessary mean 'pay'
Perhaps it was "Maybe lochie is going to pay back the $15m" but the agreement they thought they had actually turned out a month or so later to be some kind of other accounting entry.

Enumerate

13-07-2010, 11:08 AM

Balance

13-07-2010, 11:38 AM

Looking through the Companies Office registrations of share transfers for Scales and Helicopters ... there are complex holding company arrangements ... but it all seems to have ended up in SCF well before Statutory Management.

If anything, it looks like SCF actually got the benefit of holding assets, on time ... but Southbury had delayed settlement of its SCF holdings. Again, Allan Hubbard seems to be putting his own interests last.

The pattern of SCF issuing shares to Southbury, one day and buying them back and issuing them the next day is something I cannot explain.

Nothing untoward there - except that there would have been so many related party transactions that they had to be unwound first or accounted for before any real transfer of ownership can take place.

Just remember that SCF = AH = Southbury = etc etc etc

winner69

13-07-2010, 12:38 PM

Probably not even related to SCF but this in the paper today -

The government has made more room for finance company failures, adding $54 million to the amount taxpayers will provide to protect investors under the government’s retail deposit guarantee scheme.

Treasury’s latest accounts for the 11 months to May, released yesterday, reveal total provision under the scheme is now $934 million.

That is made up of $887 million provision for losses it considers “more likely than not” to occur – a $7 million increase from the end of April.

It has also provided $47 million to cover the costs of payments to investors in entities guaranteed under the scheme, which are now in receivership.

So things not getting better in the finance world

minimoke

13-07-2010, 12:59 PM

Probably not even related to SCF but this in the paper today -

So things not getting better in the finance world
It does relate directly to SCF. I think we can agree that a fair chunk of the original $887 has been put aside for SCF. Treasury has had access to SCF so it would be in a good position to say it was improving and thus the provision could be reduced. Clearly Treasury don't feel this way, yet.

Theres probbaly a good case to be made for the smaller finance companies - if they have survived this long theres probably a reasonable chance they can survive on their own two feet between now and October.

So treasury is making a provision for the following companies
• Canterbury Building Society
• Equitable Mortgages Limited
• Fisher & Paykel Finance Limited
• MARAC Finance Limited
• PGG Wrightson Finance
• South Canterbury Finance
• Southern Cross Building Society
• Wairarapa Building Society

The Extended Guarantee has also tightened up what its going to pay out on - so this would lead us to presume that if companies can last beyond October the provisioning should be less. But its not. So this can lead us to conclude that it still anticipates SCF to fall over and that the claims will be greater than originally planned. The claims may be greater than planned because perhaps Sandy Maier has been successful in getting people to roll their funds back into SCf -the more funds teh greater teh provision needs to be. So perhaps that is good news for SCF.

So perhaps now we should work out which of the companies covered by the Guarantee till October will fall over.

minimoke

13-07-2010, 01:01 PM

So perhaps now we should work out which of the companies covered by the Guarantee till October will fall over.
OK - so heres the list of companies covered till October - which of these will fall to warrant the extra provisioning:

- Allied Nationwide Finance Limited
• ANZ Call Fund
• ANZ National Bank Limited
• ANZ Term Fund
• Aotearoa Credit Union
• ASB Bank Limited
• ASB Cash Fund
• ASB Term Fund
• Asset Finance Limited
• Avanti Finance Limited
• Bank of New Zealand
• BNZ Cash PIE
• Broadlands Finance Limited
• Business Finance Limited
• Canterbury Building Society
• Cash Advantage Fund
• Caxton Employees Credit Union
• Christchurch Emergency Services Credit Union
• Citibank, N.A. - New Zealand Branch
• Client Reserve Limited
• Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (New Zealand Branch)
• Craigs Investment Partners Cash Management Trust Limited (previously ABN AMRO Craigs Cash Management Trust Limited) - ABN AMRO Craigs Cash Management Trust Limited changed its name to Craigs Investment Partners Cash Management Trust Limited with effect from 31 August 2009.
• Credit Union Auckland
• Credit Union Baywide
• Credit Union Central
• Credit Union Lakeland
• Credit Union North
• Credit Union South
• Direct Broking Call Account
• Diversified Cash Portfolio
• Equitable Mortgages Limited
• FAI Money Limited (formerly FAI Finance Limited) - See media statement: Crown withdraws guarantee from FAI Money Limited (10 May 2010).
• Farmers' Mutual Finance Limited
• FE Investments Limited
• Finance Direct Limited
• First Credit Union
• Fisher & Paykel Credit Union
• Fisher & Paykel Finance Limited
• Forsyth Barr Cash Management Trust
• General Finance Limited
• Gold Band Finance Limited
• Guardian Cash Fund (formerly Guardian CashPlus Fund)
• Hastings Building Society
• Heretaunga Building Society
• HSBC Cash Fund
• HSBC Term Fund
• Kiwibank Limited
• Kiwibank PIE Online Call Fund
• Kiwibank PIE Term Deposit Fund
• Kookmin Bank (New Zealand Branch)
• Lifestages Deposit Portfolio
• MARAC Finance Limited
• Marsden Point Refinery Credit Union
• Mascot Finance Limited - See Claims Process.
• Medical Securities Limited
• Money Market Portfolio (formerly Money Market Trust)
• Mutual Credit Finance Limited
• Mutual Finance Limited
• National Bank Call Fund
• National Bank Private Banking Call Fund
• National Bank Term Fund
• Nelson Building Society
• New Zealand Employees Credit Union
• New Zealand Firefighters Credit Union
• NZF Money Limited
• Oxford Finance Corporation Limited
• PGG Wrightson Finance Limited
• Police and Families Credit Union
• Private Banking Portfolio Call Fund
• Prometheus Finance Limited
• PSIS Limited
• Rabobank New Zealand Limited
• Rockforte Finance Limited
• Savings & Loans Limited
• South Canterbury Finance Limited - See the media statement: South Canterbury Finance Depositors still covered by Crown Retail Deposit Guarantee (20 June 2010).
• Southern Cross Building Society
• Southland Building Society
• Steelsands Credit Union
• Strata Finance Limited - See Claims Process and media statement: Strata Finance customers covered by deposit guarantee scheme (24 April 2009).
• The Hongkong and Shanghai Banking Corporation Limited (New Zealand Branch)
• The Napier Building Society
• Thoroughbred Cash Fund
• TSB Bank Limited
• TSB Bank PIE Cash Fund
• UDC Finance
• United Credit Union
• UT34 - UT 34 is marketed as at 6 April 2009 as Spicer’s Premium Plus, NZFP Cash Fund and Selected NZ Cash Fund.
• Viaduct Capital Limited (formerly Priority Finance Limited) - See media statement: Crown withdraws guarantee from Viaduct Capital Limited(20 April 2009).
• Vision Securities Limited - See media statement: Vision Securities depositors covered by Crown’s guarantee scheme (1 April 2010)
• Wairarapa Building Society
• Wellington District Manchester Unity Credit Union
• Westforce Credit Union
• Westpac New Zealand Limited
• Westpac Term PIE Fund
• Wilson & Horton Employees Credit Union
• Wine Country Credit Union

Dubdee

13-07-2010, 01:56 PM

Beagle

13-07-2010, 02:24 PM

PGWF have announced a bond holders meeting to pass a variation to the terms of their PWF030 which will allow them to extend the bonds another year. It would have been automatic but the treasury screwed the scrum on the extended gtee. Given the rate will remain 8.25% only holders with in excess 250K may be wondering.

I understand holders over 250K are being given the option to scale down their holding. The methodology used regarding the rollover is a good model for SCF to utilise, if they last that long.

Beagle

13-07-2010, 04:41 PM

I see a single large seller of the pref shares just drilled out all the buyers at 15 cents....maybe they have some inside knowledge on the imminently due Aorangi report and its implications for SCF ?

Alan3285

13-07-2010, 04:49 PM

Beagle

13-07-2010, 05:14 PM

Not really Alan. The report is due very soon and I'm not really a big believer in the Chineese Wall theory regarding its ability to stop information leaks, that's all I'm saying, and isn't it quite a coincidence there's such a large seller drilling out all the buyers at 15 cents just before the report is made public ? Do I take it you're not a big believer in conspiracy theories but are still one of the true believers in the effcient market hypothesis ?

mouse

13-07-2010, 05:15 PM

All of the posts are of SCF failing. But what would happen if instead of it failing it was put into Statutory Management? I suspect Govt could do just that. Since Govt can hold on for large problems and work its way out of the hole. In say 5 years or so. People would still get their interest but those with 'deals' such as Pyne Derivatives may have to wait.

minimoke

13-07-2010, 05:28 PM

But what would happen if instead of it failing it was put into Statutory Management?
By what measure woul putting SCF into Stat Man not be considered a "failing". The Crown Deed makes the appointment of a Statutory Manager a Default Event - so either way if its a receiver or Stat Managers eligible depositors get their money back at some point. From there the Crown does what it can to recover all it can

minimoke

13-07-2010, 05:33 PM

I see a single large seller of the pref shares just drilled out all the buyers at 15 cents....maybe they have some inside knowledge on the imminently due Aorangi report and its implications for SCF ?
that report is available here:
http://www.interest.co.nz/sites/default/files/First%20Statutory%20Managers%20Report%20-%2012%20July%20(2).pdf

Lets take some sound bites:
"To date we have seen clear evidence that there is an intricate and complex relationship between the affairs of Aorangi, Te Tua Trust and the affairs of Mr and Mrs Hubbard and other associated entities.

A lack of paper work is also impeding our progress. The standard of the paper work for the entities is not what we would have expected to have found for business entities of this size and complexity."

"From our work so far, it appears over $106 million is invested in (including by loan to) businesses and charitable trusts where Mr and Mrs Hubbard have a direct or indirect financial interest."

"Becoming aware of Hubbard Management Funds (an investment management business controlled by Mr Hubbard), of which we were not aware at the time of our appointment, has added another complexity to our role."

minimoke

13-07-2010, 05:47 PM

isn't it quite a coincidence there's such a large seller drilling out all the buyers at 15 cents just before the report is made public ? Do I take it you're not a big believer in conspiracy theories but are still one of the true believers in the effcient market hypothesis ?
Trades made at 4.06pm today - Report released around 5.00pm. Interest.co.nz has it by 5.18pm and Grant Thornton press release at 5.27pm

winner69

13-07-2010, 05:51 PM

There was also those reports of AH transferring cash into the charities he wanted to have his cash when he left this world .... all of sudden a few months ago

... and it seems these trust were only formed in March ..... won't speculate on the motivation behind this .... I'll leave that to the Stat Man to find out

winner69

13-07-2010, 05:59 PM

Diasappointed that no mention made of the cat .... maybe the cat is a beneficiary of one of those trusts

Beagle

13-07-2010, 06:06 PM

Have to go and have dinner as otherwise wife will be cross, but it looks like my conspiracy theory on leaking information is on the money.

Maybe the Stock Exchange should be made aware of this apparent insider trade ? What do you guys think ? Is that an over the top reaction or do we collectivly smell a rat ?

minimoke

13-07-2010, 06:09 PM

or do we collectivly smell a rat ?
Nope - I think the cat got there first!

Jaa

13-07-2010, 06:28 PM

Anyone else stunned that they can bumble into a $70m operation (Hubbard Management Fund) they didn't even know about? I am sure if they asked Alan beforehand he would have told them.

The comments about data handling leave an IT guy like me stunned. What if his cashbook got burnt in a fire or simply lost?

Enumerate

13-07-2010, 06:49 PM

Where's the beef?

It took three weeks to create this assessment?!?

Alll the loan balances seem correctly accounted for. There would seem to be $132 million of assets with $106million associated with Hubbard investments - $96 million of public advances. Hence a surplus of $36million.

They "unconvered" the existence of Hubbard Management Funds.

Where is the "smokng gun"?

Are related party loans a crime for a private investment company?

I think whoever sold off their SCFHAs at 15cents - possibly because of this "news" - is a fool.

minimoke

13-07-2010, 07:07 PM

They "unconvered" the existence of Hubbard Management Funds.
Who is "Hubbard Management Funds" - no sign of them at the Companies Office. Which presumably means AH is personally liable for any loses this firm makes?

Beagle

13-07-2010, 07:08 PM

Okay lets translate and put some beef on the bones....

Its a criminal breech of the Securities Act to operate a finance company without a prospectus and investment statement, up to five yars imprisionment and $300,000 fine, likewise running a funds management business without said docummentation.

It is fraud to take in investment money with promises of first ranking mortatge security when it appears reading between the lines that much of Aorangi's investments are secured by anything but.

Throw in inadequate record keeping, poor and inadequate systems and is it any wonder SM's were appointed ?

As I predicted recently, the guys who initially ran the investigation from the national enforcement unit of the companies office would not have initiated recommendations regarding SFO and SM if there wasn't proper grounds.

I predict there's a lot more skeletons to come out of the closet. Further its my contention that it would take a team of skilled forensic accountants several months, at least three, to conduct thorough due diligence on SCF so even if there is an interested party, how could the transaction be finalised by 31 August ?

Enumerate - I have thought long and hard about investing in the pref shares, like I suspect many others on here I have come through the GFC licking more than the odd wound or two and what really matters most to me now is seeing that Directors have credibility. Ah's is under the microscope and its not looking too good. Where there's smoke there's fire.

Alan3285

13-07-2010, 07:31 PM

I see a single large seller of the pref shares just drilled out all the buyers at 15 cents....maybe they have some inside knowledge on the imminently due Aorangi report and its implications for SCF ?
That's a pretty serious allegation is it not?

Alan.
Not really Alan. The report is due very soon and I'm not really a big believer in the Chineese Wall theory regarding its ability to stop information leaks, that's all I'm saying, and isn't it quite a coincidence there's such a large seller drilling out all the buyers at 15 cents just before the report is made public ? Do I take it you're not a big believer in conspiracy theories but are still one of the true believers in the effcient market hypothesis ?

I don't agree. It is a very serious matter if there is insider trading, and dismissing it as just being a 'conspiracy theory' is making light of a criminal offence that is akin to stealing from other investors.

If what you allege is true (and I don't doubt it), then the NZX should investigate.

Alan.

winner69

13-07-2010, 07:40 PM

Alan3285

13-07-2010, 07:52 PM

Alan .... I think Roger (like me) took your statement 'That's a pretty serious allegation is it not' alongs the line that he shouldn't make such allegations unless he had good solid evidence that that was actually the case .... ie you were telling him off

Your reply to his reply suggests that not what you meant .... you both actually on the same page ... yes?

Never mind the seller has made a big mistake .... they be worth a $1 soon and he lost the best part of $300 grand

It certainly looked to me that Roger doesn't believe there is much wrong with insider trading:

That's a pretty serious allegation is it not?
Alan.
Not really Alan.

Unfortunately it is not all that uncommon for people to think that insider trading is a 'victimless crime' - often also the same people don't think that there is anything wrong with other crimes against faceless counterparties - insurance fraud for example.

I don't agree with any of that - wrong is wrong.

Alan.

Enumerate

13-07-2010, 08:01 PM

Its a criminal breech of the Securities Act to operate a finance company without a prospectus and investment statement, up to five yars imprisionment and $300,000 fine, likewise running a funds management business without said docummentation.

For the purposes of subsections (2CB) and (2CBA) - Restrictions on offer and allotment of securities to the public, a person is an eligible person if the person is 1 or more of the following:
* (a) wealthy (as defined in subsection (2CD)):
* (b) experienced in investing money (as defined in subsection (2CE)):
* (c) experienced in the industry or business to which the security relates (as defined in subsection (2CE)).

I'd hazard a guess that Aorangi investors are eligible persons under the act and can proceed without a prospectus.

It is fraud to take in investment money with promises of first ranking mortatge security when it appears reading between the lines that much of Aorangi's investments are secured by anything but.

What the Statutory Manager says is:

1) A limited number of investors have signed a formal authority for investment in a contributory first mortgage over land.

2) Some investors, who believed their investments were secured over land, may not in fact have this security.

While it may be possible that there is a breach - there is no statement that there is a breach. Just because you believed your investments were secured over land, that is not evidence that Aorangi is in breach.

I believe that if any of the Aorangi investors was unhappy - had asked for their money back - they would have got it.

Throw in inadequate record keeping, poor and inadequate systems and is it any wonder SM's were appointed ?

This is a governace question and NOT a justification for Statutory l Management.

As I predicted recently, the guys who initially ran the investigation from the national enforcement unit of the companies office would not have initiated recommendations regarding SFO and SM if there wasn't proper grounds.

So, you think that the NEU should be allowed to act on any whim or fancy because they are never wrong?!? Your position on this matter is a serious worry - you have the perfect mind set for a police state.

This report does not go anywhere near justifying the action of the SFO to put Allan Hubbard into statutory management.

I would expect that if this was put before a High Court judge - they would have been out on their ear. Now that is the standard by which our system of justice demands accountability from public officials.

Allan Hubbard's judicial review will be very interesting to read - if the unconscious Nazi's in the MoC allow it to proceed.

I predict there's a lot more skeletons to come out of the closet.

Of course you do. You have all the evidence you need - that NEU investigators are "regular" guys. (Also, NEU and SFO are two separate agencies - despite Adam Feeleys stated plans).

Further its my contention that it would take a team of skilled forensic accountants several months, at least three, to conduct thorough due diligence on SCF so even if there is an interested party, how could the transaction be finalised by 31 August ?

That's a matter of opinion - based on an over excitable imagination.

Enumerate - I have thought long and hard about investing in the pref shares, like I suspect many others on here I have come through the GFC licking more than the odd wound or two and what really matters most to me now is seeing that Directors have credibility. Ah's is under the microscope and its not looking too good. Where there's smoke there's fire.

You look at the Statutory Manager's report ... and you see a smoking gun?

You look at SCF and you associate the same problems there?

You assign guilt ...

Why don't you complete the process ... impose a punishment on SCF ... I am sure you can dream up something you would consider appropriate.

I remain back at square one. I cannot see ANY justification for Statutory Management. The issues of due process are now primary, in my mind. The Hubbard judicial review is the starting point to put Minister Power on notice that his officials have grossly overstepped the mark.

Beagle

13-07-2010, 08:29 PM

For the purposes of subsections (2CB) and (2CBA) - Restrictions on offer and allotment of securities to the public, a person is an eligible person if the person is 1 or more of the following:
* (a) wealthy (as defined in subsection (2CD)):
* (b) experienced in investing money (as defined in subsection (2CE)):
* (c) experienced in the industry or business to which the security relates (as defined in subsection (2CE)).

I'd hazard a guess that Aorangi investors are eligible persons under the act.

What the Statutory Manager says is:

1) A limited number of investors have signed a formal authority for investment in a contributory first mortgage over land.

2) Some investors, who believed their investments were secured over land, may not in fact have this security.

While it may be possible that there is a breach - there is no statement that there is a breach. Just because you believed your investments were secured over land, that is not evidence that Aorangi is in breach.

I believe that if any of the Aorangi investors was unhappy - had asked for their money back - they would have got it.

This is a governace question and NOT a justification for Statutory l Management.

So, you think that the NEU should be allowed to act on any whim or fancy because they are never wrong?!? Your position on this matter is a serious worry - you have the perfect mind set for a police state.

This report does not go anywhere near justifying the action of the SFO to put Allan Hubbard into statutory management.

I would expect that if this was put before a High Court judge - they would have been out on their ear. Now that is the standard by which our system of justice demands accountability from public officials.

Allan Hubbard's judicial review will be very interesting to read - if the unconscious Nazi's in the MoC allow it to proceed.

Of course you do. You have all the evidence you need - that NEU investigators are "regular" guys. (Also, NEU and SFO are two separate agencies - despite Adam Feeleys stated plans).

That's a matter of opinion - based on an over excitable imagination.

You look at the Statutory Manager's report ... and you see a smoking gun?

You look at SCF and you associate the same problems there?

You assign guilt ...

Why don't you complete the process ... impose a punishment on SCF ... I am sure you can dream up something you would consider appropriate.

I remain back at square one. I cannot see ANY justification for Statutory Management. The issues of due process are now primary, in my mind. The Hubbard judicial review is the starting point to put Minister Power on notice that his officials have grossly overstepped the mark.

Enumerate, I don't have all night to debate the issue with you but I think its simply not plausable that all 408 investors would meet the eligability criteria for exemption from the need for an investment statement and prospectus. More likely is that they're people Mr Hubbard has built up relationship with through his accounting practice and simply its people that trust him. I can't imagine everyone of them having more than $2m in investments or being highly experienced habitual investors.

I think the initial report has to be worded in such a manner as to allow a carefully guarded outline of the areas of concern so that whilst the SM's are not explictly stating that there has been specific irrelularities regarding first mortage security arrangemnents, they're clearly looking into that as an area for specific further investigation.

The time taken for due diligence is based on some professional experience with such matters, albeit considerably less complex. Many investors have little understanding of what's involved in through due diligence of a significant sized organisation and expect professionals to be able to sort matters out yesterday. Clearly you've expressed disappoitment at the apparent lack of progress the SM's have made in three weeks and they themselves have stated it may be some months before its all sorted, so that should give you an insight into how long it would take a team of experts to untangle the real worth of SCF on today's market.

Yes I've stated the NEU guys are straight shooters and stand by that. Clearly there's serious wrong-doing in Aorangi in terms of the Securities Act.

Clearly your frustrated over the SM imposition so its only natural you'd want to vent some of that. I think there's a lot more to come out of the whole story that has yet to see the light of day. Investing in SCF is in many ways like investing in BP, who knows what the collateral damage is ?
Only for the very brave.

winner69

13-07-2010, 08:35 PM

Enumerate

13-07-2010, 08:39 PM

The guy on One News tonight said most ot the investors looked up to Mr Hubbard as a rich uncle .... or something like that.

Not what you would expect of sophisticated investors ... noy saying they didn't have the means

Maybe they took some comfort from the statement Allan Hubbard made when put into Statutory Management: "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."

Rather than believing these were empty words - maybe they invested because of the type of integrity this statement represents.

Beagle

13-07-2010, 08:41 PM

The guy on One News tonight said most ot the investors looked up to Mr Hubbard as a rich uncle .... or something like that.

Not what you would expect of sophisticated investors ... noy saying they didn't have the means

My understanding of the exemption, (please feel free to update me), but they either have to be sophisticated habitual investors or have over $2million of investments, (which nine times out of ten means the same thing unless they inherited the money), and the odds that all 408 would fit into those criteria are very very long indeed.

Pumice

13-07-2010, 08:41 PM

"I would expect that if this was put before a High Court judge - they would have been out on their ear. Now that is the standard by which our system of justice demands accountability from public officials."

Why hasn't AH or his associates challenged any of this in court? He seems pretty quiet on the whole thing.

Beagle

13-07-2010, 08:43 PM

Maybe they took some comfort from the statement Allan Hubbard made when put into Statutory Management: "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."

Rather than believing these were empty words - maybe they invested because of the type of integrity this statement represents.

So should there be an exemption in the Securities Act if your dealing with an honourable man ?

Plenty of people thought Bernie Madoff was an honourable man....

Enumerate

13-07-2010, 08:48 PM

On the subject of integrity - or complete lack of it - I notice that the Herald has syndicated a story from interest.co.nz <- Bernard Hickey's web site.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10658568

It is headlined: "Hubbard investors won't get money back any time soon" - which is formally true - but gives completely the wrong impression - they won't get their money back because the Statutory Manager won't release it. The implication, to the unwary, is that it has evaporated a la Hotchkin and Watson.

At least the Herald exercised a modicum of editorial control

The interest.co.nz headline screams as follows:

"Statutory managers say Aorangi investors face losses on second ranked, interest-free loans to related parties" <- the Statutory Manager does not, in fact say this. When has the truth ever gotten in the way of a good story on interest.co.nz.

Enumerate

13-07-2010, 08:58 PM

So should there be an exemption in the Securities Act if your dealing with an honourable man ?

Plenty of people thought Bernie Madoff was an honourable man....

This is your primary weakness, Roger. You suspend your rational, critical judgment in favour of "personalisation" of the issues.

You think that because NEU officers are "straight shooters" - that if they refer a case to the SFO - that the accused is guilty.

You suggest that because some people thought Madoff was honorable - and that Hubbard is honorable - that Hubbard and Madoff must be the same financial criminals.

You must work to correct this ... it is worse than a fundamental error in logic ... it causes you to perpetuate injustice.

winner69

13-07-2010, 09:01 PM

The alarm bells really started ringing for me when i saw this headline in the NBR of June 18 'Hubbard divests assets into charitable trusts'

The article started off '....Allan Hubbard is transferring great chunks of his private investments into charitable trusts as part of a succession plan designed to help the disadvantaged' and then went on to mention that shareholdings in more than 30 mostly farming-related assets had recently been transferred to his most trusted associates.

Maybe I am a cynical type but the timing and the apparent urgency in these matters just didn't seem right

Enumerate

13-07-2010, 09:05 PM

Why hasn't AH or his associates challenged any of this in court? He seems pretty quiet on the whole thing.

Apparently, the NBR reported that Hubbard was initiating a judicial review of the decision to impose Statutory Management on him, the wife and the cat, etc.

Statutory Management is an order in council. This is a type of legislation by decree. A judicial review will consider case put to the Minister and decide if he acted properly, in terms of the law.

Allan Hubbard is the second case of putting an individual into Statutory Management. The issues of defending the public interest seem to be a key part of the act. There are serious questions whether this was appropriate.

Of course, you will never read about this on interest.co.nz.

I wonder why Bernard Hickey is so one eyed about Allan Hubbard and SCF?

percy

13-07-2010, 09:09 PM

May I ask how SCF,Aorangi,Hubbard Fund Management,etc would have passed an audit? or how did they get an S&P rating.?

How would staff, directors, managers worked for a company where records were not up todate?
I have never borrowed from a finance company but Bank loan and a mortgage through lawyer there was a lot of paperwork.Lending money I have always recieved paper work.

Balance

13-07-2010, 09:10 PM

Apparently, the NBR reported that Hubbard was initiating a judicial review of the decision to impose Statutory Management on him, the wife and the cat, etc.

Statutory Management is an order in council. This is a type of legislation by decree. A judicial review will consider case put to the Minister and decide if he acted properly, in terms of the law.

Allan Hubbard is the second case of putting an individual into Statutory Management. The issues of defending the public interest seem to be a key part of the act. There are serious questions whether this was appropriate.

Of course, you will never read about this on interest.co.nz.

I wonder why Bernard Hickey is so one eyed about Allan Hubbard and SCF?

Maybe because he is well aware that AH and SCF is likely to cost us taxpayers hundreds of millions of dollars?

Enumerate

13-07-2010, 09:12 PM

The alarm bells really started ringing for me when i saw this headline in the NBR of June 18 'Hubbard divests assets into charitable trusts'

Maybe the story was syndicated from interest.co.nz

After three weeks ... there doesn't seem to be any statement by the Statutory Manager that Aorangi money was "evaporating".

Balance

13-07-2010, 09:13 PM

May I ask how SCF,Aorangi,Hubbard Fund Management,etc would have passed an audit? or how did they get an S&P rating.?
How would staff, directors, managers worked for a company where records were not up todate?

Ask Woodnorth Myers.

Remember Madoff used a small accounting firm to audit his accounts?

Beagle

13-07-2010, 09:15 PM

This is your primary weakness, Roger. You suspend your rational, critical judgment in favour of "personalisation" of the issues.

You think that because NEU officers are "straight shooters" - that if they refer a case to the SFO - that the accused is guilty.

You suggest that because some people thought Madoff was honorable - and that Hubbard is honorable - that Hubbard and Madoff must be the same financial criminals.

You must work to correct this ... it is worse than a fundamental error in logic ... it causes you to perpetuate injustice.

The NEU guys investigated for some time before recommending SFO and SM and all i'm saying is that I know the guys, have seen their thorough work and been involved with it, and they wouldn't have recommended that course of action without good grounds, which appears to be the case. I just though the blog might want to know that the NEU guys are good blokes, in my opinion, sorry if you think I've personalised the issue but isn't the whole SCF Aorangi thing getting pretty down and gritty for lots of people so what's the big deal with me expressing my knowledge of those guys ?

I'm not saying AH is guilty, but what I'm saying is that in my opinion its highly likely based on my experience with those guys that there was good grounds for further investigation, which clearly is in fact, the case.

My reference to Madoff was perhaps a little unfortunate, BUT what I'm saying is that the Securities Act applies to everyone, and that exemption's for being a good community member, which clearly AH has been, don't apply.

There's no argument about the fact that AH has done a world of good in the community, unlike those mongrels from Hand-over who did nothing but steal, and pillage old people's funds, but that doesn't exempt him from compling with the regulations does it and that was the sole point of my reference.

BTW, yes Alan, I think insider trading is a serious matter, and I've lost faith with the efficient market hypothesis many years ago.

Alan3285

13-07-2010, 09:30 PM

May I ask how SCF,Aorangi,Hubbard Fund Management,etc would have passed an audit? or how did they get an S&P rating.?

I wasn't aware that anything other than SCF was subject to an audit, nor that any of the others had S&P ratings.

What required Aorangi, Hubbard Fund Management, or the 'etc' to be audited?

How would staff, directors, managers worked for a company where records were not up todate?

No idea. I wasn't aware until your post that any of them apart from ACF *have* employees, nor that the records in SCF are not up to date.

I have never borrowed from a finance company but Bank loan and a mortgage through lawyer there was a lot of paperwork.Lending money I have always recieved paper work.

Me too. I understood that it is the same when you borrow from SCF, but perhaps there is some indication otherwise?

Alan.

Balance

13-07-2010, 09:30 PM

I see a single large seller of the pref shares just drilled out all the buyers at 15 cents....maybe they have some inside knowledge on the imminently due Aorangi report and its implications for SCF ?

Issues before insider trading can be alleged :

The Report is dated 12th July, and was sent first to Aorangi investors. Presumably, that's how Interest would have obtained a copy. So it's in the public domain.

There's really nothing in the Report which has not been written about or speculated upon. In fact, Enumerate would say it's a positive.

However, if anyone feels that insider trading has been committed, a complaint to the NZX is in order. And be assured that the NZX will follow it through once a complaint has been laid.

It s an easy trace to whoever was selling and why the seller was selling.

Balance

13-07-2010, 09:32 PM

I wasn't aware that anything other than SCF was subject to an audit?

What required Aorangi, Hubbard Fund Management, or the 'etc' to be audited?

Alan.

Because Aorangi and Hubbard Fund Management were taking money in from the public.

Ask Woodnorth Myers. Remember they were entrusted with auditing SCF - a multi-billion finance companies with complexities beyond the ability of mere mortals to comprehend.

Enumerate

13-07-2010, 09:34 PM

Maybe because he is well aware that AH and SCF is likely to cost us taxpayers hundreds of millions of dollars?

I sincerely hope that you are never the subject of the level of muck raking that is being dished out to Allan Hubbard and SCF.

Hickey has published complete nonsense - like his story on why SCF should be put into Statutory Management.

There is a cluster of "birds of a feather" that gather for SCF stoning sessions. Like David Hillary - who reckons that SCF has to find regulatory capital to fund risk weighted assets of $2.8billlion; who whitters on about "natural justice" and why the Statutory Management of Allan Hubbard is consistent with this (complete hypocrisy - or he does not know the meaning of "natural justice"); who postulates the "Liquidation value" of SCF by applying an arbitrary of discounts to the core assets.

All this is designed to scare those of weak mind or nervous disposition. It is an organised litany of lies, deception and manipulation

Alan3285

13-07-2010, 09:36 PM

Because Aorangi and Hubbard Fund Management were taking money in from the public.

Really? I haven't seen any adverts, nor is there a prospectus that I can find for either Aorangi or Hubbard Fund Management.

Where are you getting that from?

Thanks,

Alan.

Balance

13-07-2010, 09:38 PM

Really? I haven't seen any adverts, nor is there a prospectus that I can find for either Aorangi or Hubbard Fund Management.

Where are you getting that from?

Thanks,

Alan.

Can you please read the SM Report? Please.

Beagle

13-07-2010, 09:41 PM

"All this is designed to scare those of weak mind or nervous disposition. It is an organised litany of lies, deception and manipulation" Enumerate

Don't worry Enumerate, I'm sure your pref shares will be back to the full $1 when this huge conspiracy against AH and SCF has seen the full light of day. I'm sure there's plenty of debating to be done another day.....

Balance

13-07-2010, 09:42 PM

I sincerely hope that you are never the subject of the level of muck raking that is being dished out to Allan Hubbard and SCF.

Hickey has published complete nonsense - like his story on why SCF should be put into Statutory Management.

There is a cluster of "birds of a feather" that gather for SCF stoning sessions. Like David Hillary - who reckons that SCF has to find regulator capital to fund risk weighted assets of $2.8billlion; who whitters on about "natural justice" and why the Statutory Management of Allan Hubbard is consistent with this (complete hypocrisy - or he does not know the meaning of "natural justice"); who postulates the "Liquidation value" of SCF by applying an arbitrary of discounts to the core assets.

All this is designed to scare those of weak mind or nervous disposition. It is an organised litany of lies, deception and manipulation

Stop being emotional, Enumerate, and face the facts.

AH had access to billions of investors' monies via SCF, Aorangi and other entities. There is a legal (and moral and ethical) high level of duty of care regarding record keeping and investment and use of the funds. What does the evidence point to so far?