South Canterbury Finance Limited

[Enumerate]

You mentioned aggressive forced sales which according to you excluded Sth. Islanders. That is plain nonsense.

You take away the main financial institution funding these sales .... who is lending the money? I can really see the Aussie banks stepping up to the plate to fund investment in assets that will be in free fall, at that stage.

Maybe George Kerr will have his SI Bank up and running? Maybe PGGW will strike oil and suddenly be awash with petro dollars.

[Enumerate]

In the event of not being able to nail down capital, what are the options for SCF, Stat Man, Receivership, liquidation & what does each mean?

If the trigger for Govt guarantee kicks in, do all the scf010,020 &030 get treated the same ? 010 are until 15/12/12. & the SCF030 are so close to maturing $100 mill 8/10/10 but they only have $10 mill? so that's not likely.

SCFHA $100m Perpetual
SCF010 $125m 15/12/12
SCF020 $125m 15/6/11
SCF030 $100m 8/10/10

Under the Trust Deed - the Trustee could declare a default state if any of the loan repayments or interest payments is not made.

This would trigger an event under the Retail Deposit Guarantee Scheme. The government would then be in a position to appoint a Receiver.

The SCF0x0 and Secured debentures would be subject to the 2010 RDGS. This protected up to $1m for NZ investors who did not have expert Trustees or foreigners involved with the investment. The government would payout all this debt and would assume ownership of the various debentures and bonds.

Torchlight's secured facility would have priority for payment as the SCF assets are liquidated. The government and secured creditors outside the RDGS would be the next tranche. Unsecured creditors, which would include all SCFHA holders would be next and anything left over would go to Southbury - the equity holder.

[POSSUM THE CAT]

Enumerate you are not figuring in the losses in the first few years even if you paid cash for the asset you would be better off with that money invested elsewhere as you are losing at least 2% a year compounded that adds up to a lot of money even if you payed cash for the farm butif you are compounding an even bigger margin on debt you might just breakeven in 30 years.

[macduffy]

1) The Aussie Banks have no interest in NZ economic development - much less the rural and 2nd tier commercial sectors that SCF serves.

I havn't been following the SCF debate too closely but the above statement caught my eye.

I couldn't disagree more. NZ represents a significant part of each of the Aussie banks' businesses. NZ's economic fortunes are very important to them.

Won't have any bearing on what happens to SCF, of course.

[fungus pudding]

You take away the main financial institution funding these sales .... who is lending the money?

Someone else, or some other institution; regardless of who it is they certainly won't turn away a borrower solely because of their Sth. Island address.

[winner69]

I hope that no one on the thread was frightened into selling their SCFHAs by the chorus of approbation. I believe that of all SCF stakeholders - SCFHA holders will be smiling the widest. I believe that their capital (to $1 per pref) will be secure.

I am happy to be known as a "Hubbard cultist". I believe this "cult" does exist. It is the "cult" of making money through rational investment.


Agree with you on that point ..... 'investing' in SCFHAs is a rational investment .... as we know there are several scenarios that could play out where these things are worth a buck ..... and at 15 cents thats pretty good odds to make a few bucks if the govt takes an 'irrational' approach to resolving this mess

So why not have a dabble with the petty cash .... jeez Shasta took Spurs at $1,22 in a 2 horse field .... SCFHA's are nearly 7 to one

[Enumerate]

Enumerate you are not figuring in the losses in the first few years even if you paid cash for the asset you would be better off with that money invested elsewhere as you are losing at least 2% a year compounded that adds up to a lot of money even if you payed cash for the farm butif you are compounding an even bigger margin on debt you might just breakeven in 30 years.

Probably true - just like the home ownership vs rental decision. Just as people flock to home ownership - farmers will herd to farm ownership. The psychology of the situation is the same.

A good farmer will always believe they can take any given property and manage it better than the current owner. There is a positive bias due to productivity advances - even for average farmers.

Even economists are not economically rational.

[winner69]

David Hilary says the govt should just give SCF the $1.7 billion to SCF now so SCF can pay everybody out and then put the recievers/liquidators in and close down this disaster of a company once and for all
http://www.lostsoulblog.com/2010/08/bail-out-why-not.html

All those farmers who have been financed through SCF can keep their farms as long as they stay within the terms of the loan so no wholesale sale of farms (at depressed prices) and no economic demise of the diary industry in the SI. .... or am I naive that most are not up to date with interest payments ... whoops we have a problem then

If at the the end of the day there is a shortfall of 1/2 billion many will wonder where all the money has gone .... surely this amount has just not disappeared has it .... somebody down the food chain must have benefited ... and one bet it wasn't Robin Hood

[GTM 3442]

Agree with you on that point ..... 'investing' in SCFHAs is a rational investment .... as we know there are several scenarios that could play out where these things are worth a buck ..... and at 15 cents thats pretty good odds to make a few bucks if the govt takes an 'irrational' approach to resolving this mess



With SCFHA paying 5.61% until the next reset, who on earth would pay face value ?

Perpetuals at over face value are those with AAA ratings (Rabobank) or the Aussie banks with Long (2013) reset dates.

Unrated Infratil is at 65c in the dollar.

How on earth could SCFHA's be worth face value ?

I can't see them going over 40c in the dollar, even in the most optimistic scenario.

Or have I missed something ?

[winner69]

With SCFHA paying 5.61% until the next reset, who on earth would pay face value ?

Perpetuals at over face value are those with AAA ratings (Rabobank) or the Aussie banks with Long (2013) reset dates.

Unrated Infratil is at 65c in the dollar.

How on earth could SCFHA's be worth face value ?

I can't see them going over 40c in the dollar, even in the most optimistic scenario.

Or have I missed something ?

In normal circumstances i would agree with you. However there are a couple of scearios under which a total retructure of SCF could/would see the prefs being repaid in full .... and the way emotions are running anything is possible

On the other hand there is also a strong possibility that come Tuesday they could/will be worthless

Pick you odds and take your chance

Then again by Tu

[GTM 3442]

In normal circumstances i would agree with you. However there are a couple of scearios under which a total retructure of SCF could/would see the prefs being repaid in full .... and the way emotions are running anything is possible

On the other hand there is also a strong possibility that come Tuesday they could/will be worthless

Pick you odds and take your chance

Then again by Tu



Curious, I am. What are the scenarios ? Possibly means I'm ignorant as well as curious.

[Beagle]

With SCFHA paying 5.61% until the next reset, who on earth would pay face value ?

Perpetuals at over face value are those with AAA ratings (Rabobank) or the Aussie banks with Long (2013) reset dates.

Unrated Infratil is at 65c in the dollar.

How on earth could SCFHA's be worth face value ?

I can't see them going over 40c in the dollar, even in the most optimistic scenario.

Or have I missed something ?

No you havn't missed anything. Only completly delusional idiots think they will go back to a dollar. Fact is the terms of these PERPETUAL shares which were issued at a time when the margin over interbank swap rates was at an all time low, are woefully inadequate for the new economic environment we operate in today.

Enumerate and others invested in these type of instruments would do well to consider what would be an appropriare return for a non-voting perpetual preference share in the new operating environment of non-guaranteed debenture deposits post December 2011.

I would suggest on a risk adjusted basis the margin over 10 year interbank swap rate should be at least 9% not the woefully pathetic 2% the current shares offer. The implied yield would thus be 9% + current swap rate for ten year about 4.5 % = 13.5% required rate of return.

With a current return of 5.61% and an apparent protracted period of extremly low interest rates one could conculde that for the perpetual shares to offer a fair yield they would have to trade at 5.61/13.5 = 41.5 cents on the dollar and that's ONLY IF virtually all uncertainty regarding SCF is removed by some extremly complicated deal this week.

Unfortunatly many bloggers appear to be unsure of the methodology of the fundamental analysis of acceptable current market yields and their effect on the capital value of perpetual debt instruments which I have described above. I have suggested for some time that the odds when you buy in at 15 cents or thereabouts are simply not as attractive as they look as the absolute maximum possible realistic return is about three times your money. This is simply because in the new GFC environment which we currently operate, the market will demand such a return, in my opinion, especially for a finance company perpetual share.

[winner69]

Your analysis is quite correct Roger but those who took a punt on the prefs at 15 cents odd didn't do it for the yield .... like has been outlined a total recapitalsiation of SCF by somebody other than Southbury could/would result in the prefs being repaid in full

Than again come Tuesday and they might be worthless.

[GTM 3442]

Thanks Roger,

Not sure that I agree with your "...apparent protracted period of extremly low interest rates..." scenario, but that's a different subject.

Thanks for the reply.

[Beagle]

Winner 69 I'm picking they're worthless, which is why I havn't bought any.

GTM3442 - For what its worth I'm in the double-dip camp and believe that central banks world-wide will need to keep interest rates at historic lows for years to come.

[winner69]

Winner 69 I'm picking they're worthless, which is why I havn't bought any.

GTM3442 - For what its worth I'm in the double-dip camp and believe that central banks world-wide will need to keep interest rates at historic lows for years to come.

Prob are worthless come Tuesday but still a better bet than the guy from Christchurch (presumeably) who put $10k to make a profit of $3k on Canterbury to beat Tasman last week .... the punt in this case is $10k to make $56k profit ..... not that i punted that much

[GTM 3442]

Your analysis is quite correct Roger but those who took a punt on the prefs at 15 cents odd didn't do it for the yield .... like has been outlined a total recapitalsiation of SCF by somebody other than Southbury could/would result in the prefs being repaid in full

Than again come Tuesday and they might be worthless.


I see two scenarios:
(1) Someone buys SCF to cherry-pick it, in which case SFHAs, being equity, go to the wall
(2) Govt guarantee, in which case SFHAs, being equity, go to the wall

Who is going to pay them out when they don't have to ?

[winner69]

The Treasury carry on around the Gvt Guarantee not covering trusts managed by professional trustees or trusts/estates where any beneficiary is overseas could have a few ramifications here

I would hazard a guess that a lot of the so called rich SI money is in these sprt of vehicles

Maybe a quick payout under the scheme won't happen for many

[Jaa]

I would suggest on a risk adjusted basis the margin over 10 year interbank swap rate should be at least 9% not the woefully pathetic 2% the current shares offer. The implied yield would thus be 9% + current swap rate for ten year about 4.5 % = 13.5% required rate of return.

With a current return of 5.61% and an apparent protracted period of extremly low interest rates one could conculde that for the perpetual shares to offer a fair yield they would have to trade at 5.61/13.5 = 41.5 cents on the dollar and that's ONLY IF virtually all uncertainty regarding SCF is removed by some extremly complicated deal this week.
.

Instant Finance pay a 15% yield on their preference shares issued in Dec 2008. So I would say 13.5% for a larger and in theory more stable finance company would be about right reducing over time to 10% perhaps.

[winner69]

Good old Mick Hoskings guts eh .... after listening to Carruthers he is now convinced this is an injustice or something ... and tells us so ad nausem

whats overlooked is taht hubbards empire was unravelling a couple of years ago but the govt guarantee kept the money go round turning for a few more years ... and it still irks me that a company that essentially self destructed is bailed out by the taxpayer

Alan may have had a great business for decades but at the end of the day he will be remembered for other things

[Lizard]

Any thoughts on how secure funding for Marac and UDC will be without debenture holders post GG?

Seems to me that there have been a lot of funds found their way into Marac/UDC which will be reluctant to go back there post guarantee on any terms. SCF failing now probably final nail in coffin for any confidence from debenture holders. I haven't looked closely enough at these to know whether they are likely to have sufficient funding without debenture deposits.

Also expect a gathering wave of money coming out of these and looking for a new home - maybe in bank TD's but where else? Listed and unlisted bank bonds - though already yields are getting quite low on these and investors needing to pay above face value on many.

[minimoke]

I would hazard a guess that a lot of the so called rich SI money is in these sprt of vehicles

Maybe a quick payout under the scheme won't happen for manyPresumably Forsyth Barr managed funds will have some SCF exposure - unless the clever money exited a while back. The Govt already had $887m provisioning and realistically most of this has to be tagged for SCF. I can't see why it would want to take on the Bad Bank and loose the benefit of the assets in the Good Bank. I'm still swinging it will be a receivership.

As an aside, will the potential new owners (and their depositors) still have coverage under the Deposit Guarantee?

Coming back to the Deposit Guarantee. If there is a default event and the Govt pays out - where do they stand in hte line to get money back. Are tehy infornt of or behind Torchlight?

[Alan3285]

Presumably Forsyth Barr managed funds will have some SCF exposure - unless the clever money exited a while back. The Govt already had $887m provisioning and realistically most of this has to be tagged for SCF. I can't see why it would want to take on the Bad Bank and loose the benefit of the assets in the Good Bank. I'm still swinging it will be a receivership.

As an aside, will the potential new owners (and their depositors) still have coverage under the Deposit Guarantee?

Coming back to the Deposit Guarantee. If there is a default event and the Govt pays out - where do they stand in hte line to get money back. Are tehy infornt of or behind Torchlight?

I can't be certain - I guess you'd have to read the GGS stuff on the Treasury website - but I believe Treasury effectively just step into whatever position the people they pay out had before.

I would imagine therefore, behind Torchlight, ahead of bond holders, unsecured creditors, pref shareholders, and ord shareholders.


Don't rely on my memory though (I don't!)

Alan.

[Lizard]

Update out.


Market announcement by South Canterbury Finance Limited

30 August 2010

Market Update by South Canterbury Finance Limited

South Canterbury Finance announced today that it is still in discussions with interested parties in an endeavour to put together a recapitalisation and restructuring solution acceptable to all stakeholders. In view of recent media speculation, the Company also announced that there can be no certainty that the proposals it has been pursuing will be successfully implemented. The Company expects to be in a position to make an announcement to the market on Tuesday 31 August.

[winner69]

GENERAL

Market announcement by South Canterbury Finance Limited

30 August 2010

Market Update by South Canterbury Finance Limited

South Canterbury Finance announced today that it is still in discussions with interested parties in an endeavour to put together a recapitalisation and restructuring solution acceptable to all stakeholders. In view of recent media speculation, the Company also announced that there can be no certainty that the proposals it has been pursuing will be successfully implemented. The Company expects to be in a position to make an announcement to the market on Tuesday 31 August.

Ends


First time Sandy hasn't been totally positive

[Winston]

Forsyth Barr managed portfolios seemed to to have been used to to buy a lot of SCFHA preference shares. Was this because Forsyth Barr were the underwriters?

[minimoke]

. In view of recent media speculation, the Company also announced that there can be no certainty that the proposals it has been pursuing will be successfully implemented.

First time Sandy hasn't been totally positive
What a load of bull****. Posters here have for months been saying there was no certainty that new equity would be introduced. These were comments made not to undermine SCF - they were opinions held without the benefit of rose tinted glasses. Sandy has known all along that "there can be no certainty that the proposals it has been pursuing will be successfully implemented." - he has failed, until today, to tell the market so!

[fungus pudding]

What a load of bull****. Posters here have for months been saying there was no certainty that new equity would be introduced. These were comments made not to undermine SCF - they were opinions held without the benefit of rose tinted glasses. Sandy has known all along that "there can be no certainty that the proposals it has been pursuing will be successfully implemented." - he has failed, until today, to tell the market so!

Yeah - but it would be remiss of the company not to blame someone, or anyone, or even everyone else, when the opportunity arises. It's the Kiwi way.

[Lizard]

Sandy has known all along that "there can be no certainty that the proposals it has been pursuing will be successfully implemented." - he has failed, until today, to tell the market so!

It's called maintaining your negotiating position - i.e. keep potential buyers believing they need to act or someone else is going to walk off with the deal... admitting there might not be a deal reads as capitulation.

[Beagle]

http://www.depositrates.co.nz/news/976497210/three-bidders-now-vying-for-south-canterbury-finance.html

Looks like Sandy Maier considers the efforts of the cultists "uphelpful".

Lizard, I can't speak for anyone else but when my debenture funds matured from SCF in May 2010 I threw the lot into KIPGC convertible notes.

Current yield at $1.07 approx 7.5%, with no down-side and potential upsaide on conversion if KIP shares are above $1.20 in December 2014.

At the risk of stating the obvious, they are N.Z.'s premier property company with a 77% equity ratio. They're as boring as bats#it, but I've come to love boring after the massive effects of the GFC for three years.

[winner69]

http://www.depositrates.co.nz/news/976497210/three-bidders-now-vying-for-south-canterbury-finance.html

Looks like Sandy Maier considers the efforts of the cultists "uphelpful".



Sounds a bit pissed off with our friends eh

[Lizard]

Thanks Roger... I have a feeling finding homes for maturing deposits from various fixed income sources is going to be an ongoing headache for me over next 12 months! If it was all mine, I'd happily go shares, but it's not... Will have a look at the KIPGC.

[Beagle]

You're welcome Lizard. FYI KIPGC is the only security on the entire N.Z. market of which I am aware that has no down-side, yet still maintains an upside if KIP shares rally to be over $1.20 in approx four and a half years time, i.e. if there is an eventual solid recovery in N.Z. ( I for one am not holding my breath), owning KIPGC may allow you to participate in it. (they convert at a 2% discount to the 20 day VWAP of KIP shares in December 2014 or $1.20 whichever is the lesser).

With KIP's extremly conservative balance sheet, well diversifed property holdings and well spread tenant base, I can't think of a better place to hide from the on-going effects of the GFC, whilst still giving me potential equity upside if the market at some stage in the future rebounds strongly, but if anyone has any other great low risk stratagies, I'm all ears !!

If you go to their website which from memory is www.kipt.co.nz and click on the tab about their convertible notes there's all the details in there.

[Silverlight]

Sources close to the company last week tipped a deal with overseas investors that could require as much as $600 million in taxpayer-funded sweeteners and would result in losses of about $250 million.

But should the company fail, the Government would be liable for $1.55 billion in payments to investors covered by its retail deposit guarantee, and may eventually recover less than half of that.

From a taxpayer point of view which is the lesser of two evils?

1.55bill from the taxpayer to other new zealanders, who should spend the majority of those funds reinvesting in NZ

or

600bill from the taxpayer to a foreign company, with no guarantee that money will remain in our NZ economy.

[winner69]

One day people will get it .... Alan has a failed business whatever way you look at it ... and he has to recognise it .... and yelling profanities at sweey little reporters on TV tells me he still lives in la la land

Anyway Mr Dann says Alan should apologise

Alan Hubbard owes New Zealand an apology

By Liam Dann 12:30 PM Monday Aug 30, 2010 Twitter

His supporters have written public letters to the Government calling for Alan Hubbard to be treated more fairly. Business Herald editor Liam Dann, a fellow Cantabrian, responds.


Alan Hubbard owes New Zealand an apology. Whatever happens from here it is clear that his failure as a businessman has put hundreds of millions of taxpayer dollars at risk.

In the context of the enormous constraints on public spending we face in areas like health and education this is an appalling financial mess that Hubbard has ultimately left the taxpayer to clean up.

Cries from his supporters, that if he'd been left in charge it would all have been alright, no longer ring true.

Put the probe into his personal financial entities to one side. The real story is South Canterbury Finance - the $900 million liability hanging around the taxpayer's neck. That was his baby.

Hubbard lost control of that company earlier this year after it had breached its trust deed. He was removed from the board and given the sentimental title of President for Life.
By that point the Government had already effectively decided the company was too big to fail. That is the only sane reason it could have been allowed it to stay in the government guarantee scheme when it was extended.

So Hubbard's debenture holders were given the luxury of a state guarantee - despite the fact that some of the lending this company did was every bit as convoluted and risky as that of other failed finance companies.

Sandy Maier, who has a reputation as the most skilled corporate fix-it man in the country, is now in charge and frankly appears to have worked magic just to keep it alive this far.

He divided the assets in to three piles, the working businesses, the good loans and the bad loans.

The bad loan "bank" is up to its neck in $600 to $700 million of debt on assets that may yield as little as half of that when they are realised.

When it is euphemistically said that South Canterbury failed to "stick to its knitting" it is the bad bank that people are talking about. That is also the bit that no white-knight investor wants to touch - so it threatens to sink the whole company. To put it in context, it is a bigger failure in its own right than Hanover.

The irony is that because South Canterbury is also a major lender to many productive agricultural businesses it is in danger doing far more damage to the national economy than the likes of Hanover ever could.

It is a great shame that Alan Hubbard - and the South Canterbury management team he put in place during the last days of the property boom - did not stick to their knitting.

But they didn't and they were caught out like everyone else. It is a tragedy that fantastic business story that is Hubbard's career should be so tarnished.

Alan Hubbard is clearly a nice man. It would be surprising if the Serious Fraud Office finds anything of a criminal nature in his accounts. He appears to be a man of honour and integrity.

If this is the case and he wishes to salvage what is left of his reputation he needs stop being so proud and accept what has happened.

His supporters are doing him no favours by encouraging him to fight back at the Government and the designated officials. They are working now to do what is best for the taxpayer.

As it becomes clearer just what this business collapse will cost each of us we can expect public anger to grow. Support for Hubbard already looks parochial. As the embattled community of Timaru continues to back him it will become embarrassing. If Hubbard really cares about his community he should take responsibility for this mess and spare them that.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10669903

[winner69]

SCF has a AAA rating for investors in secured debenture stock and is considered to be in the top three or four safest finance companies in New Zealand. The topic here is [u]not</u> about the lending side of the company, but whether it would be a good company in which to have an [u]equity share</u>.

Certainly there are a few 'dodgy' companies which may yet 'fall over' but this is unlikely to be one of them. I think it is a little unfair to 'tar' all finance companies with the same general 'brush' of being risky in the manner rmbrave, Capitalistand a few others are willing to do. The gearing of SCF is in much better shape than most finance companies and it has a track record from 1915 of being run as a conservative 'money machine'.

I would certainly put it on the same footing as Marac (which is also in the top three or four in ratings) and that company is one of the prime reasons PGC (the holding company)is a popular share. I think Snapperhas the right handle on things.

If it does float, I would consider it to be fortunate that investors would have a chance to participate in a company in the finance field which historically has a proven solid background. After all, there are very few companies left in the NZX which remain "New Zealand owned and operated". Look at the banks - most are Australian and although very good investment prospects, leave a lot to be desired when it comes to the aspect of taxation of dividends.

It would be healthy for the NZX to have another share market opportunity such as SCF.

I was wondering how this thread started .... way back in 2005 Slelessi posted this ... and was quickly chastised by Capitalist for ramping .... ha ha

Of course the float didn't go ahead ... maybe cause Alan knew things mightn't stand up to public scrutiny .... but that was before the GFC anyway but the foundations of many finance houses were starting to crumble anyway

Amazing how things ahve changed in 5 years eh .... a AAA rating to going broke

[minimoke]

http://www.depositrates.co.nz/news/976497210/three-bidders-now-vying-for-south-canterbury-finance.html

Looks like Sandy Maier considers the efforts of the cultists "uphelpful".



he is now saying the govt is not in any kind of discussion with the Company about a bail out option. Now he tells us. Quite happy to let that rumour run its course. Looks like Sandy is tidying up the loose ends before the Receivership / default event is announced. No longer looking at days - it'll all be over in hours.

[minimoke]

Liam Dann is right ... [I]

Can someone remind me how much wealth has TEL destroyed again? Or other finance companies?
Or we might wonder how good govt itself is good at destroying wealth. AIA took a massive hit under Labour when the sale was blocked.

[Balance]

Liam Dann is right ... The bad loan "bank" is up to its neck in $600 to $700 million of debt on assets that may yield as little as half of that when they are realised. ... then its "only" 300-350 million that taxpayers are up for.

Can someone remind me how much wealth has TEL destroyed again? Or other finance companies?

And how much wealth did TEL created prior to 2006?

[Capitalist]

he is now saying the govt is not in any kind of discussion with the Company about a bail out option. Now he tells us. Quite happy to let that rumour run its course. Looks like Sandy is tidying up the loose ends before the Receivership / default event is announced. No longer looking at days - it'll all be over in hours.

Yep. He had to be careful not to create a run didn't he.

It annoys me when people blame govt - as Winner said SCF went from AAA to broke in 5 years. That's not govt's fault.

[Beagle]

Lets get real. It was $500 million in the so called bad bank as at 31 December 2009. Since then its been steadily downhill, just look at how the realisable value of the Hanover loan book has been written down, many more loans from the so called good bank would now be impaired or have gone bad, there's around $300m of related party transactions that any new investor won't want to know about, so it could easily be $1b that's in the too hard basket, which the Govt will be expected to pick up at par value in any potential bailout. Just what they might relaise out of this allmighty mess is anyone's guess but it wouldn't surprise me in the slightest if they got a $600-800m hiding.

The Govt are between a rock and a hard place as even if they buy this incredibly huge bunch of "so called" assets at par value, there's no assurance they won't be called on again before December 2011 if the new owner gets into trouble trying to climb the December 2011 wall of maturities.

The answer to me is to simply initiate Receivership or Statutory management of SCF and allow Sandy time to work the situation to mitigate the loss as much as possible. SCF as a brand are finished, its time to stop the pretence.

[Contrarian]

Gidday

Equity from Chinese, a backdoor for their entry to NZ farming. Probably exempt OIO approval.

Bill English, from the far south, has cancelled his overseas trip tonight, No Singapore etc

[winner69]

This is going to take forever .... and forever

SFO widens Hubbard inquiry

Duncan Bridgeman | Monday August 30, 2010 - 03:53pm
The Serious Fraud Office has widened its investigation into Allan Hubbard’s Aorangi Securities to include Hubbard Management Funds, a company uncovered by statutory managers last month.

http://www.nbr.co.nz/article/sfo-widens-hubbard-enquiry-129145

[Toddy]

The way things are heading this is going to make a hell of a movie.

A good title may be 'I use to sleep in a dirty old sack, and still do' or 'Speights, handshakes and the deal that was never done'.

[winner69]

The way things are heading this is going to make a hell of a movie.

A good title may be 'I use to sleep in a dirty old sack, and still do' or 'Speights, handshakes and the deal that was never done'.

Richard Long could play the lead role .... just to amke the story interesting

And then they could collect more debenture money as punters filed out of the theatre

[Toddy]

Gidday

Equity from Chinese, a backdoor for their entry to NZ farming. Probably exempt OIO approval.

Bill English, from the far south, has cancelled his overseas trip tonight, No Singapore etc

Maybe the Govt should let this whole thing fall over. Then offer assistance by offering farming loans to those farmers who's loans are due to roll in the short term (via Kiwibank) i.e allow them access to finance. That way there will be no fire sale of 'farms'.

[winner69]

Wonder if our mate will be on the TV news again tonight?

[minimoke]

The answer to me is to simply initiate Receivership or Statutory management of SCF and allow Sandy time to work the situation to mitigate the loss as much as possible. SCF as a brand are finished, its time to stop the pretence.
I suspect there will be a "no expense spared" final meal at Robbies Timaru tonight on the company credit card. Then the plug will be pulled. Its really not that hard a decision. Its just about making sure as many ducks are in a row before the inevitable axe falls. Sandy has done all he can now - there ain't anything left to be done. The receivers will be brought in to extract maximum value as there is no potential in resurrecting the corpse that once was a vibrant finance company

[minimoke]

Then offer assistance by offering farming loans to those farmers who's loans are due to roll in the short term (via Kiwibank) i.e allow them access to finance. That way there will be no fire sale of 'farms'.
Why the govt?. What about Fonterra coming to the party since these farmers apparently contribute 1% to their production.

[winner69]

That Hubbard Managed Fund has done well .... PWC apaprently say that its 10 year performance puts it in the top 10 funds in the country (I think that whats i heard) ... quite impressive really

Even better than GPGs 18% pa over 20 years methinks

[Beagle]

I suspect there will be a "no expense spared" final meal at Robbies Timaru tonight on the company credit card. Then the plug will be pulled. Its really not that hard a decision. Its just about making sure as many ducks are in a row before the inevitable axe falls. Sandy has done all he can now - there ain't anything left to be done. The receivers will be brought in to extract maximum value as there is no potential in resurrecting the corpse that once was a vibrant finance company

I agree, its riddled with so much toxic debt, in effect the cancer has spread past the point of no return.

AH has been putting out scrub fires since the GFC began, how else does anyone explain the exponential growth in related party transactions ?

The reality is he's now out of resources to the point where he has to committ fraud to make his private investment companies look satisfactory in a vain attempt to keep the Titanic afloat.

Game over for Mr Hubbard, he built his wealth off extremly high leverage and played the capital gains game on asset values. Its time for him to admitt defeat, the GFC has beaten him and now he's just a silly old fool who doesn't know when he's finished. He's become an embarrassment to the South Island now.

[Beagle]

http://www.sharechat.co.nz/article/3a775195/govt-liability-for-scf-about-600m.html

John Key says he is awaiting the Trustee's decision tomorrow...

[Enumerate]

Shouldn't you guys wait for the announcement and maybe even some accounts before you condemn SCF to the dustbin of history?

I really think Bill English canceled his flights just so he could say "No thanks" to a deal.

But then again, you guys have been prepared to lynch Allan Hubbard, without charges, with out evidence, without right of reply.

[minimoke]

Shouldn't you guys wait for the announcement and maybe even some accounts before you condemn SCF to the dustbin of history?

I really think Bill English canceled his flights just so he could say "No thanks" to a deal.

But then again, you guys have been prepared to lynch Allan Hubbard, without charges, with out evidence, without right of reply.
I Think Bill cancelled his flights as the fall of the countries largest finance company is something of some magnitude. The fall out will take some handling. Alternativly SCF finding a backer doesn't require Bill to be on hand to co-sign the deal.

This hasn't been about lynching AH - it s been about the demise of SCF. AH will inevitably bear the brunt of any criticism since he was pretty much sole director and shareholder during much of the action that led it to todays position. As for evidence - lets wait for the SFO to do its job. Clearly as at today there is insufficient evidence to give them confidence that ll is rosy within Aorangi and HMF.

AH has a chance of a right of reply - we just need to see the SCF books (due out tomorrow) and then we can all get to see in black and white how he has steered the ship through these turbulent waters. His right of reply can also come from Aorangi and HMF - trouble is we now know thus funds are sadly lacking in any documentation of any substance and we now in one example funds have been stated to existed where no funds actually do. Not sure what sort of right of reply we can expect to that.

He also does seem to be getting a right - I hear to day he says he's "too old" for all this. I couldn't agree more. But its not to do with age - it has to do with competence. The reality, I think we'll find is that the moment he went on dialysis his thinking started to go down hill. Thats not a reflection on AH - just a natural consequence of that type of medial intervention.

[fungus pudding]

Maybe the Govt should let this whole thing fall over. Then offer assistance by offering farming loans to those farmers who's loans are due to roll in the short term (via Kiwibank) i.e allow them access to finance. That way there will be no fire sale of 'farms'.

Forget kiwibank - they haven't got any money to lend, and I doubt that the quality of their loan book is any better than SCF's.

[Toddy]

Shouldn't you guys wait for the announcement and maybe even some accounts before you condemn SCF to the dustbin of history?

I really think Bill English canceled his flights just so he could say "No thanks" to a deal.

But then again, you guys have been prepared to lynch Allan Hubbard, without charges, with out evidence, without right of reply.

Lynch, nah, just calling a spade a spade the good old southern way.

The Cob n Co stage coach will ride into Timaru at midnight tonight with a cargo full of gold nuggets and a crate of the finest southern gold lable whisky.

[macduffy]

Forget kiwibank - they haven't got any money to lend, and I doubt that the quality of their loan book is any better than SCF's.

A rather sweeping statement!

What is the evidence? Kiwibank's lending is predominantly mortgage loans to home owners, according to their publicity.

[winner69]

Wonder if all this emotional talk about SCF going broke will destroy the SI economy is really relevant

How much has SCF lent over the past year? I would guess not much so they haven't been doing much to support farmers and businesses any way

[Balance]

Wonder if all this emotional talk about SCF going broke will destroy the SI economy is really relevant

How much has SCF lent over the past year? I would guess not much so they haven't been doing much to support farmers and businesses any way

SCF in receivership would still have to honor contracts - if farmers and businesses are keeping to their debt servicing, life continues.

It's only those who have defaulted or are having interest-free loans BUT continue to trade on a wink and nod from Hubbard who will be impacted.

[Toddy]

Wonder if all this emotional talk about SCF going broke will destroy the SI economy is really relevant

How much has SCF lent over the past year? I would guess not much so they haven't been doing much to support farmers and businesses any way

Winner

You will find that it is probably a few property developers that started the scare mungering around the farmers exposure to SCF. A debate in parliament around saving the few property developers left in the SI would not gain much traction.

[fungus pudding]

A rather sweeping statement!

What is the evidence? Kiwibank's lending is predominantly mortgage loans to home owners, according to their publicity.

Exactly. Much done on levels of equity that by now will have disappeared, and their client base is probably at the low earner end.

[Newman]

Has anyone got solid evidence that bonds (SCF010, SCF020) are covered by governmental gurantee? How could $600m be enough to cover depositors (and bond holders?)?

[Onthemoney]

Talked to someone in the know today and they told me that Alan helped out a friend who had a couple of farms. The friend thought Alan was great as he helped him out with finance only problem was that when things got a bit tough Alan ended up with the farms. Not too sure what to make of this story though.... This was back in the 70s and 80s.

[winner69]

Has anyone got solid evidence that bonds (SCF010, SCF020) are covered by governmental gurantee? How could $600m be enough to cover depositors (and bond holders?)?

You'll be OK mate .... unless they are in a name of trust and one of your kids who lives in England is a beneficiary

The $600m is the estimated shortfall after paying out under the guarantee less what they can recover from all the outstanding loans .... but god knows what the real figure is

[winner69]

Wonder what this story from the NBR website is all about - subscriber stuff

hardly surprising - next they will be saying that some loans have been forgiven or something

South Canterbury offloading assets ahead of D-day

[Newman]

Wonder what this story from the NBR website is all about - subscriber stuff

hardly surprising - next they will be saying that some loans have been forgiven or something

South Canterbury offloading assets ahead of D-day


South Canterbury offloading assets ahead of D-day
Chris Hutching | Monday August 30, 2010 - 04:25pm
South Canterbury Finance is understood to be preparing to force the sale of $50 million worth of North Island farms.

The sales come in the context of speculative reports about whether the government is prepared to partially fund a bailout to keep the financier going or wait and see if receivership is inevitable. South Canterbury has about $1.5 billion worth of investments covered by the government retail deposit scheme.

Whether the sale of the North Island farms indicates that a government purchase of its bad debts is unlikely or whether it is just a strategy to raise cash as quickly as possible remains to be seen.

South Canterbury was due to make an announcement about recapitalisation by tomorrow after requesting a trading halt of its securities last Friday.

Meanwhile, marketing material was being prepared by real estate agencies ahead of an anticipated announcement about the sale of 12 farms in Manawatu this week.

They are understood to be owned by Tawera Land Company, associated with colourful entrepreneur Ken Thurston.

Three other Thurston’s companies were placed in receivership earlier this month including Fernfresh Growers and Exporters to the World, Property Food and Technology and Aotea Coolstores.

The first report from receiver Gordon Hanson of Goldsmith Fox in Christchurch says South Canterbury appointed him under a general security agreement of November 2009 as security for money paid to a group of companies owned by Mr Thurston pursuant to a gross guarantee deed.

The cross guarantees involve Aotearoa Resorts, Aotearoa Coolstores, Tawera Land Company, Kenneth William Thurston, Property Food and Technology, Water Enviro Services, Sheddan Investments, Newbridge Group, Stay cool, Taste Fresh, Advanced Logistics, (in receivership), and Fernfresh Growers and Exporters to the World (in receivership).

The amount secured by South Canterbury Finance’s cross guarantees is $13,992,087 and debts to other creditors take the total debt of Fernfresh to $20,049,194 matched by net assets of $19.9 million, according to the report.

But South Canterbury has second-ranking security over Tawera with the first ranking creditor being ANZ. A source close to the action said this may indicate South Canterbury is pushing for the sale as a strategy to protect its position as first ranking mortgage holder over other properties in the Thurston group.

Mr Hanson said the Fernfresh properties he is dealing with include a coolstore at Tawera, two houses and bare land at Fielding. Fonterra is eyeing up the coolstore.
Meanwhile, the Tawera farms understood to be due to be launched into a subdued rural market this week are mostly sheep and beef farms.

ANZ and South Canterbury have been working together to bring about a staged selldown. But property management company Total Property Services was in the process of appointing Bayleys as agents today.

[Onthemoney]

Wonder what this story from the NBR website is all about - subscriber stuff

hardly surprising - next they will be saying that some loans have been forgiven or something

South Canterbury offloading assets ahead of D-day


Hoping to pick up a cheap helicopter company myself....

[Jaa]

Wonder if all this emotional talk about SCF going broke will destroy the SI economy is really relevant

How much has SCF lent over the past year? I would guess not much so they haven't been doing much to support farmers and businesses any way

Last two stories about SCF loan recipients I saw were a Manawatu pea farming operation and a flashy Wellington property developer and now this about a colourful entrepreneur from Wairarapa! Hardly life threatening stuff to the mainland economy :p

I think Toddy might be right about SCF & Hubbard loan recipients lobbying to protect their sweet heart and/or no interest loans.

[Jaa]

Hoping to pick up a cheap helicopter company myself....

Was in Nelson last week and noticed that HNZ had taken over Origin Pacific's old hanger and terminal. Combined with another large recently branded HNZ hanger at the airport they have certainly upped their visibility of late.

[Onthemoney]

Don't want to stick the knife in but when a new business venture I was involved in 4 years ago needed money the trading banks were not eager in lending a few million one in fact said to try South Canterbury - no worries. They saw lending the money as a sale - their risk profile was too open. It was almost like that is 10 million we have lent over the other banks.

[morv]

Jaa, the pea farmer and tawera land is the same operator,looks like everything got to be sold to cover 1st and 2nd mortgages as 50000 dollars of frozen peas didnt cover scf ,s $13 million or thereabouts

[fungus pudding]

Talked to someone in the know today and they told me that Alan helped out a friend who had a couple of farms. The friend thought Alan was great as he helped him out with finance only problem was that when things got a bit tough Alan ended up with the farms. Not too sure what to make of this story though.... This was back in the 70s and 80s.

Make this of it. It's necessary and normal behaviour when loans are not performing. It's the ones where they haven't stepped in that are the problem.

[Stranger_Danger]

"Finance companies have come out fighting after one of the country's largest fund managers warned their debentures were "seductive" and posed unnecessary risk to small investors.

Yesterday, many labelled the comments by ASB Group Investments "sour grapes".

Elders Finance and Hanover Group executive chairman Mark Hotchin said the comments "smacked of desperation" as fund managers were losing money and market share to finance companies.

"And so they should be because the returns are better and they are safer."

He was angry finance company debentures had been called "seductive".

"It's seductive because it's real. You're the first cab off the rank so you get paid first."

Gotta love it, hindsight and all LOL

[Stranger_Danger]

That was from 2005 by the way.

As Buffett says, with investing it takes a while to work out whether you knew what you were doing.

[Arbitrage]

Let me guess, Mr Hubbard (as we have heard ad nauseum he is the South Islands richest man) will hand over his fortune to cover the debts and save the NZ taxpayer?

[minimoke]

Last two stories about SCF loan recipients I saw were a Manawatu pea farming operation and a flashy Wellington property developer and now this about a colourful entrepreneur from Wairarapa! Hardly life threatening stuff to the mainland economy :p

I think Toddy might be right about SCF & Hubbard loan recipients lobbying to protect their sweet heart and/or no interest loans.
We also have SCF loaning second mortgages to Seripisos (wellington) and an Paraitai drive (Auckland) development. Clearly not just a South Island banker! Its a bit like saying the ASB is just an Auckland bank.

[Alan3285]

Let me guess, Mr Hubbard (as we have heard ad nauseum he is the South Islands richest man) will hand over his fortune to cover the debts and save the NZ taxpayer?

Didn't he already do that with the helicopter and dairy companies?

Alan.

[minimoke]

Didn't he already do that with the helicopter and dairy companies?

Alan.
Of course he did. AH has no money left to put into SCF. What little he did have left he was busy shuffling around in Aorangi and HMF.

[Beagle]

I'd like a cheap Robinson R44 Helicopter, just one, not the whole HNZ company, I need a new hobby after this exhausting fiasco.

[peat]

http://whaleoil.gotcha.co.nz/2010/08/30/perhaps-some-people-should-take-some-time-to-educate-themselves/

[minimoke]

http://whaleoil.gotcha.co.nz/2010/08/30/perhaps-some-people-should-take-some-time-to-educate-themselves/
Peat - that might have some relevance if AH was at the helm. I think we can trust Sandy to have done the right thing

[peat]

uh-huh
also, I'm thinking Key wouldnt have re-iterated the guarantee y'day if they were intending to use an out clause .....

[Lizard]

http://whaleoil.gotcha.co.nz/2010/08/30/perhaps-some-people-should-take-some-time-to-educate-themselves/

Note that the blogger deliberately left out the next clause:


3.11 Are my deposits still covered if the Crown guarantee is changed or withdrawn?
Updated 30 Jul 2010

Eligible deposits made with an institution approved for the Crown guarantee continue to be covered after any withdrawal of a guarantee until the earlier of the date they become due and payable and the expiry of the guarantee. New deposits made after withdrawal of a Crown guarantee are not covered. Roll-overs of deposits or investments occurring after the date of withdrawal are deemed to be new deposits and therefore will not be covered in the event they are rolled over.

If the deposit-taking institution was approved for the original and/or revised Deeds of Guarantee for the scheme that ends on 12 October 2010 but not for the extension scheme that ends on 31 December 2011, then deposits with that institution are guaranteed until 12 October 2010, unless the deposits become due and payable earlier. In the event of a default on or before 12 October 2010, the terms of the original or revised Deeds of Guarantee (as appropriate based on the date the investment was made) would apply and the deposits existing as at the date of default would be covered, including any deposits that were not due to mature until after 12 October 2010. In the event of a default after expiry of the original scheme on 12 October 2010, no guarantee would apply.
If the deposit-taking institution was approved for the extension Deed of Guarantee for the scheme that ends on 31 December 2011, then deposits with that institution are guaranteed until 31 December 2011, unless the deposits become due and payable earlier. In the event of a default on or before 12 October 2010, the terms of the original or revised Deeds of Guarantee (as appropriate based on the date the investment was made) for the scheme that ends on 12 October 2010 would apply. In the event of a default after 12 October 2010, the terms of the extension Deeds of Guarantee for the scheme that ends on 31 December 2011 would apply.

i.e. if the guarantee is withdrawn from the institution, existing deposits remain covered.

[minimoke]

No surprise - receivership!

[Lizard]

Anyone think there might be a significant sweetener offered as an option for existing debenture holders to accept a replacement debenture without govt guarantee from a new owner/recapitalised good bank?

[Silverlight]

NZX Announcement

South Canterbury Finance Limited announced today that it has been unable to complete a recapitalisation and restructure. As a result, the Company would have been unable to certify to Trustees Executors Limited, in accordance with the terms of its debenture trust deed with Trustees Executors Limited, that it was compliant with various financial covenants under the debenture trust deed for the financial year ended 30 June 2010.

Accordingly, South Canterbury Finance Limited has requested Trustees Executors Limited to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so. A further announcement will be made by the Company in due course.

[minimoke]

So the "good news" is that depositors will get their money back. Lets see how long that process will take. Lets be grateful for a Deposit Guarantee scheme that enable these people to be paid a premium of 8.5% for backing something destined to fail. Blood useless scheme!

How are you faring Enumerate. Hopefully your exposure wasn't too great.

[Beagle]

I did my absolute best to try and warn everyone on this blog that receivership was coming. Just have a look at all my previous posts.

Enumerate, you wouldn't be told mate and unfortunatly you'll have to take the haircut like a man.

Its high time to accept that AH mismanaged his affairs since the GFC began. Lachie McLeod also horribly mismanaged the comnpany while he was in charge and unfortunatly the Titanic was too far gone allready when Sandy Maier took the helm.

[winner69]

jeez ... didn't even go down to the wire ..... theres still 16 hours left today

[Beagle]

Trading in all SCF securities suspended indefinitly by the NZX.

[Toddy]

Whats the damage to guys like George Kerr. Didn't he pump some cash into SCF recently.

[bull....]

Receivership was the only viable option so a Thumps up to the govt for making the right decision and not throwing more tax payers money into this dud.

[minimoke]

The tragedy is that it was plain as day to some of us here that SCF could not and would not survive. The odds were just stacked too much against them. No doubt the blame game will begin so I'm going to lob my first shot at the deposit investors. These people need a rocket up their arse for putting their money in on the basis of a persons "reputation" without looking at the business behind where their money was going. And what compounds this is that those investors make their stupid decisions basking in the knowledge that the tax payer will prop them up if things go wrong. And they get paid a premium interest rate for their stupidity.

[Beagle]

Agreed, Enumerate, you are a fool and deserve to lose your money.

Go put your money with gaynor dude, you havent a clue.

He'll be back blamimg the entire collapse on the Statutory Management of Aorangi and Hubbard Funds management and saying if it wasn't for that SCF would have been fine and there were no systemic issues in SCF and there was nothing wrong with their loan book blah, blah, blah.

I predict he will stay in complete denial......its always someone else's fault...my obstinant, petulant teenage kids are like that too !!

Does anyone remember when I predicted we would never see the annual financial loss for the year ended 30 June 2010, because the number would be just sooooo awful, or words to that effect...

[Dr_Who]

Agreed, Enumerate, you are a fool and deserve to lose your money.

Go put your money with gaynor dude, you havent a clue.

Thats abit rough mate.

We've all had out fair share of losses. Enumerate was just passionate about his investment.

Those that continue to tell you they've never made loses and only wins are just full of ****., and there are a few of them around.

[minimoke]

Agreed, Enumerate, you are a fool and deserve to lose your money.

Go put your money with gaynor dude, you havent a clue.

SC - I'm sure Enumerate can speak for himself but don't place him as a fool. He was rational (though in hindsight misguided) in his analysis and was taking a punt on his best interpretation of the information on hand. Good on him - if things had gone the other way he would have deserved the gains he would have no doubt made.

Make no mistake - the fools are the depositors who without any thought, analysis or effort put their money into SCF.

There are people who are worse than the fools - it is those that blindly led the Grannies and unsophisticated people into SCF and kept their hopes alive when no hope existed. I wouldn't be too upset if these people were hung out to dry.

[Alan3285]

The tragedy is that it was plain as day to some of us here that SCF could not and would not survive. The odds were just stacked too much against them. No doubt the blame game will begin so I'm going to lob my first shot at the deposit investors. These people need a rocket up their arse for putting their money in on the basis of a persons "reputation" without looking at the business behind where their money was going. And what compounds this is that those investors make their stupid decisions basking in the knowledge that the tax payer will prop them up if things go wrong. And they get paid a premium interest rate for their stupidity.

We'll see how long it takes for them to get paid out by Treasury, but I don't know that they were 'stupid' - a reasonably quick payout might mean they've made an okay return with no capital risk.

My 'lob' is at Goff and his goons for waving the guarantee scheme out there in late 2008. Once it was put up as an option, the deal was done, and getting out was always going to be very difficult. Investors took advantage of their stupidity.

Of course, anyone who voted Labour in 2005 are really the ones to blame ultimately.

Alan.

[Lizard]

.... so I'm going to lob my first shot at the deposit investors. These people need a rocket up their arse for putting their money in on the basis of a persons "reputation" without looking at the business behind where their money was going.

Thanks Minimoke... guess that's meant for me :)

Have to say, don't feel too guilty about having put my money in. Didn't seem like getting 10.25% for the last two years (and until I am paid back) was a bad decision at the time. Still doesn't. Risk vs return, same as any other investment anyone on here holds. Probably make up for the 10,000 SCFHA I'm left holding to go with it.

[Dr_Who]

Whose next, ALF?

[peat]

Of course, anyone who voted Labour in 2005 are really the ones to blame ultimately.
Alan.
voters had no idea about the possibility of any govt guarantee at that time

[minimoke]

, but I don't know that they were 'stupid' - a reasonably quick payout might mean they've made an okay return with no capital risk.

Do you really think the Timaru grannies have the slightest bit of knowledge of the workings Dep Guarantee. I don't think they had a clue - instead they just blindly put their money into SCF to"support that nice Mr Hubbard who has done so much for the region over the decades". I hold POA for a depositor so I'll see just how long it does take to get the loot back.

[Alan3285]

Thats abit rough mate.

We've all had out fair share of losses. Enumerate was just passionate about his investment.

Those that continue to tell you they've never made loses and only wins are just full of ****., and there are a few of them around.

Yep - we've all made losses in the past (and will do again).

Enumerate was playing the numbers. His analysis was good, just it didn't pay off this time. A healthy overall return through more ups than downs in his portfolio I expect.

For those that aren't up to it (not aiming at you Dr_Who!), there are plenty of nice safe bonds out there that will give you a small margin over bank desposits. MCC is placing one shortly. ShareTrader isn't really their home though. Watch for all the 'I told you so' comments from those people in the letters pages.

Alan.

[Beagle]

Thanks Minimoke... guess that's meant for me :)

Have to say, don't feel too guilty about having put my money in. Didn't seem like getting 10.25% for the last two years (and until I am paid back) was a bad decision at the time. Still doesn't. Risk vs return, same as any other investment anyone on here holds. Probably make up for the 10,000 SCFHA I'm left holding to go with it.

Look, I have to fess up and admitt I too was in receipt of 10.25% for 18 months and was very relieved to get my money back in May. Fortunatly I avoided the temtation to buy into SCFHA's. I can't say I wasn't tempted, I certainly was especially when they got down to 10 cents a couple of times, fortunatly with my accounting experience and with the able assistance of David Hillary's comments, I learned to read through the complete bulls#it that was SCF's financial statements and didn't get caught holding a single cent of SCF's securities when the music eventually stopped.

What did surprise, is how long they lasted.

[Alan3285]

voters had no idea about the possibility of any govt guarantee at that time

They voted for a bunch of people who had already demonstrated their contempt for freedom of choice, and for that freedom to be expressed in the market deciding who stands and who falls.

Alan.

[minimoke]

Thanks Minimoke... guess that's meant for me :)

.. Still doesn't. Risk vs return, same as any other investment anyone on here holds.

But its not Risk v Return. If you deposited money in SCF there is zero risk you will loses your deposit. Thats because I'm busy working to pay tax to back your decision. So no risk and a guaranteed return. Contrast that with say an investment in shares - ALF, for example. Maximum risk virtually no return and no tax payer sitting behind them. Or invest in a dairy farm - there's no tax payer sitting behind these people giving them their initial capital back. The Deposit Guarantee has distorted peoples whole perception of investments.

[MrDevine]

I guess the question is Lizard, whether you would have put your dough into SCF if it didn't have a government guarantee? I still can't for the life of me fathom why the govt backstopped this outfit. If you put your dough in there in the belief that whichever way it went you'd get it back, then I think frankly it's fraud. You should donate that money to charity, because at the end of the day its my tax dollars. Sorry for the rant, but one of the sensible things this govt has done in recent times is to let the market dictate losses. Caveat, BNZ and Air NZ could be argued are strategic assets. AIR has done pretty well with govt backing too. Mr D.

[fungus pudding]

[QUOTE=MrDevine;317649] If you put your dough in there in the belief that whichever way it went you'd get it back, then I think frankly it's fraud. You should donate that money to charity, because at the end of the day its my tax dollars. QUOTE]

And my tax dollars too, but to call it fraud is plain ridiculous.

[Romulus]

Has anyonr read The Treasury note- if not read

[MrDevine]

Why? If you put your money into something that you believe is dodgy, and theres a chance it might fail, but oh its fine everybody else will bail you out? Its a semantic argument I know, if I've offended anyone I apologise.

[J R Ewing]

Let's be fair about the deposit guarantee, it's always easier with hindsight. When it came into force during the GFC, I was feeling pretty nervous about money on deposit with the trading banks. A crisis of confidence in the banks would have been disastrous for a great number of businesses even if it didn't actually tip over a major bank or two. Whether it should have been offered to finance companies is another matter, and perhaps the Govt should have cut these adrift rather than extending the scheme as well.

[J R Ewing]

Why? If you put your money into something that you believe is dodgy, and theres a chance it might fail, but oh its fine everybody else will bail you out? Its a semantic argument I know, if I've offended anyone I apologise.

More like shooting sitting ducks than fraud. But if the rules say it's OK, it's OK.

[Silverlight]

Media Statement:
All South Canterbury Finance depositors to be repaid under Crown guarantee
31 Aug 2010

All depositors and stockholders on South Canterbury Finance Ltd’s register of debt securities will be repaid by the Crown, Acting Secretary to The Treasury Gabriel Makhlouf said today.

The Trustee for South Canterbury Finance has appointed receivers to the company, which is a default triggering the Crown’s guarantee.

"Depositors and stockholders do not need to make a claim to The Treasury because the Trustee has made a claim on their behalf. All depositors and stockholders on South Canterbury Finance’s register will be repaid," Mr Makhlouf said.

"The Trustee has been nominated as the eligible creditor under the terms of the Guarantee and the Crown today paid the Trustee in full. The Treasury and the Trustee are cooperating to promptly repay all registered holders of South Canterbury Finance debt securities," Mr Makhlouf said.

"When an up-to-date register of debt security holders is available, the Crown and the Trustee will arrange prompt payment to everyone on the register. We expect an orderly and prompt payment to South Canterbury Finance depositors and stockholders," Mr Makhlouf said.

Because the Trustee has been nominated as the eligible creditor, some depositors and stockholders who may not have previously been repaid will now be repaid by the Crown. While this will incur an upfront cost, it is cheaper overall for the Crown because it facilitates immediate payout of depositors and avoids the need for the Crown to make future interest payments. Criteria relating to citizenship and tax residency do not apply and depositors and stockholders will not be assessed using those criteria. The criteria for being repaid is that you are on the South Canterbury Finance register of debt securities at the date of default. Ordinary shares and preference shares issued by South Canterbury Finance are not eligible for repayment. Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures and bonds issued by South Canterbury Finance.

South Canterbury Finance is a Timaru based financial institution with around 35,000 depositors and approximately $1.6 billion in deposits.

"It is important to remember that the Crown guarantee is not designed to prevent a company from defaulting; it is designed to protect depositors and stockholders affected by a default," said Mr Makhlouf.

[Silverlight]

Looks like Enumerate has done quite well after all or are the SCFHA's classed as preference shares?

[minimoke]

Let's be fair about the deposit guarantee, it's always easier with hindsight. When it came into force during the GFC, I was feeling pretty nervous about money on deposit with the trading banks. A crisis of confidence in the banks would have been disastrous for a great number of businesses even if it didn't actually tip over a major bank or two. Whether it should have been offered to finance companies is another matter, and perhaps the Govt should have cut these adrift rather than extending the scheme as well.
Pragmatically, I agree. There was a need for the Deposit Guarantee at the time - especially as Austria had one and there would have been an additional risk of a flight of funds across the Tasman. However in this case we had Scheme One (that One was probably OK) and Scheme Two which is the extension scheme.

SCF should not have been put into the extended schmo - but that argument is moot since they would have still come under the initial scheme. I would have mush preferred something that backed the deposit - but not the interest received on that deposit (there is a degree of risk the depositor should have been asked ot bear) but the ability for Finance Companies to offer outrageous interest rates (like 8.5%) is quite immoral. Perhaps thats the word MrDevine was looking for.

[Lizard]

Looks like Enumerate has done quite well after all!


Nope. I think by "stockholders" they mean debenture stock holders, not shareholders.


Ordinary shares and preference shares issued by South Canterbury Finance are not eligible for repayment.

[minimoke]

Looks like Enumerate has done quite well after all!

I thought he had SCFHA's which aren't covered by the Guarantee.

[J R Ewing]

$1.6 billion with around 35,000 depositors. That's an average of $457,000 each. This isn't just Kiwi mum's and dad's is it!

[MrDevine]

Yeah but what about personal responsibility? What about your responsibility to other taxpayers? I don't give a stuff about the rules. Its a problem in this country that everybody wants a hand out and no one wants to take responsibility for their own actions. I'm furious.

JR, I accept that RDGS was a prudent move in the dark days of September/October 2008, but the treasury must have known about all the shambolic related party loans, why they extended SCF into the scheme earlier this year I don't know.

[fungus pudding]

Pragmatically, I agree. There was a need for the Deposit Guarantee at the time - especially as Austria had one .........


Golly gosh! So did Australia. :D

[Lizard]

Why? If you put your money into something that you believe is dodgy, and theres a chance it might fail, but oh its fine everybody else will bail you out? Its a semantic argument I know, if I've offended anyone I apologise.

Given the climate in which the government guarantee was introduced, was it more selfish to be investing and giving these institutions a chance or withdrawing cash from the bank and sticking it under a mattress as some were doing? Depends on perspective.

[Silverlight]

I thought he had SCFHA's which aren't covered by the Guarantee.

Yeah my bad, but they are paying all debt holders, no matter of size, so including institutions.

[fungus pudding]

$1.6 billion with around 35,000 depositors. That's an average of $457,000 each. This isn't just Kiwi mum's and dad's is it!

A hell of a lot of them are.

[J R Ewing]

Yeah but what about personal responsibility? What about your responsibility to other taxpayers? I don't give a stuff about the rules. Its a problem in this country that everybody wants a hand out and no one wants to take responsibility for their own actions. I'm furious.

JR, I accept that RDGS was a prudent move in the dark days of September/October 2008, but the treasury must have known about all the shambolic related party loans, why they extended SCF into the scheme earlier this year I don't know.

I don't think there is a general perception that individuals have any responsibility to other taxpayers. Our general culture would be to grab whatever is going wouldn't it? I mean that's why we have LAQC's, so that virtually everyone in NZ can get state handouts like working for families if they are of a mind to. I agree that it shouldn't happen, and I don't do that myself, but at the end of the day if you want to avoid underarm bowling you have to get the rules right.

[MrDevine]

Lizard, I understand the climate in which it was introduced for the main deposit banks with 'prudent' lending and that's fine. But SCF should not have had an extended guarantee. And you as a seasoned investor putting your money into SCF should have known there was a high risk of failure, but you have chosen to speculate because of the moral hazard the govt implied by keeping them in the scheme. As minimoke says it's 'immoral' I think its worse.

[J R Ewing]

A hell of a lot of them are.

I reckon there must be a few Japanese housewives and Belgian dentists in there as well.

[Beagle]

A hell of a lot of them are.

Someone needs a new calculator. It works out to $45,714.29 on average each.

Interesting way that Treasury are doing this. A little bit of vested interest with ceretain people in the corridors of power that otherwise wouldn't have been eligable perhaps ??

[minimoke]

While we ponder the impact of a receivership - we were also told the Final YE accounts would be released today. Is there still an obligation for this to happen now receivers are called in - or does all the red ink in the accounts get buried never to see the light of day?

[J R Ewing]

Someone needs a new calculator. It works out to $45,714.29 on average each.

Interesting way that Treasury are doing this. A little bit of vested interest with ceretain people in the corridors of power that otherwise wouldn't have been eligable perhaps ??

Yep, I need a new calculator!

[Beagle]

While we ponder the impact of a receivership - we were also told the Final YE accounts would be released today. Is there still an obligation for this to happen now receivers are called in - or does all the red ink in the accounts get buried never to see the light of day?

Yes its all buried as I suggested it would be. Assertions by Sandy that the company was basically breaking even for the quarter ended 31 March 2010, were, shall we say, extremly optimistic "at very best", at worst...well i'd better not say it I might be sued for slander.

[Beagle]

Yep, I need a new calculator!

Don't worry mate, I had to clean my glasses to see it properly, that's bigger numbers than I'm used to dealing with !!

[Lizard]

Lizard, I understand the climate in which it was introduced for the main deposit banks with 'prudent' lending and that's fine. But SCF should not have had an extended guarantee. And you as a seasoned investor putting your money into SCF should have known there was a high risk of failure, but you have chosen to speculate because of the moral hazard the govt implied by keeping them in the scheme. As minimoke says it's 'immoral' I think its worse.

Okay, you've achieved your goal and my sensibilities are hurt.

[Romulus]

For thoses in doubt- THE SCFHA ARE NOT COVERED read below from the TREASURY WEBSITE


Media Statement: All South Canterbury Finance depositors to be repaid under Crown guarantee

31-Aug-10

All depositors and stockholders on South Canterbury Finance Ltd’s register of debt securities will be repaid by the Crown, Acting Secretary to The Treasury Gabriel Makhlouf said today.

The Trustee for South Canterbury Finance has appointed receivers to the company, which is a default triggering the Crown’s guarantee.

"Depositors and stockholders do not need to make a claim to The Treasury because the Trustee has made a claim on* their behalf.* All depositors and stockholders on South Canterbury Finance’s register will be repaid," Mr Makhlouf said.

"The Trustee has been nominated as the eligible creditor under the terms of the Guarantee and the Crown today paid the Trustee in full. The Treasury and the Trustee are cooperating to promptly repay all registered holders of South Canterbury Finance debt securities," Mr Makhlouf said.

"When an up-to-date register of debt security holders is available, the Crown and the Trustee will arrange prompt payment to everyone on the register. We expect an orderly and prompt payment to South Canterbury Finance depositors and stockholders," Mr Makhlouf said.

Because the Trustee has been nominated as the eligible creditor, some depositors and stockholders who may not have previously been repaid will now be repaid by the Crown. While this will incur an upfront cost, it is cheaper overall for the Crown because it facilitates immediate payout of depositors and avoids the need for the Crown to make future interest payments. Criteria relating to citizenship and tax residency do not apply and depositors and stockholders will not be assessed using those criteria. The criteria for being repaid is that you are on the South Canterbury Finance register of debt securities at the date of default. Ordinary shares and preference shares issued by South Canterbury Finance are not eligible for repayment. Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures and bonds issued by South Canterbury Finance.

South Canterbury Finance is a Timaru based financial institution with around 35,000 depositors and approximately $1.6 billion in deposits.

"It is important to remember that the Crown guarantee is not designed to prevent a company from defaulting; it is designed to protect depositors and stockholders affected by a default," said Mr Makhlouf.

Depositor information:

Free phone: 0800 222 061
Web: www.treasury.govt.nz/economy/guarantee/retail/claims



Media contact:

Angus Barclay | Senior Communications Advisor
Tel: +64 4 917 6146

[Arbitrage]

Can someone divide $1.7 billion by the number of taxpayers? I want to know how much this has cost me.

[trackers]

Can someone divide $1.7 billion by the number of taxpayers? I want to know how much this has cost me.

About $400 for every person in the country.

[Arbitrage]

A bit over half a weeks wages for your average check out operator.

[trackers]

A bit over half a weeks wages for your average check out operator.

Actually I can do better than that.

There's 2,170,000 people employed in NZ (taxpayers). So each taxpayer is stumping up $783...

[Jaa]

About $400 for every person in the country.

Give it a rest guys! I hardly think SCF is going to present the Treasury with a total loss, the estimate from those that should know is $600m, $150 each. Let alone the fees paid into the scheme!

I was and still am a big fan of the Government guarantee, it should be made permanent. In 2008 all the talk was about how NZ was one of the few developed countries without one. We all know if one of the big Aussie banks were to let their NZ operation fall over it would be bailed out by the government. The guarantee scheme forced them for the first time to pay for this implicit guarantee and boy did they hate it!

Once you included the foreign owned banks you had to include all the NZ non-banking deposit taking sector otherwise what was left of NZ finance inc would have been destroyed and make NZ even more of a branch office causing even more profits to flow overseas.

The guarantee scheme will probably end up breaking even in the long run and even if it doesn't $150 per person is a small price for everyone to pay to protect our economy, national interest and to allow an orderly wind down of all our excesses. Let alone the stress and poor health it has saved people.

Make the second version of the scheme (that had the benefit of hindsight and the refinement of time) permanent!

[fungus pudding]

Raise the tax on tobacco products again ~ that should sort it and it's what probably caused all the problems in the first place! :ohmy:


disc - taxpayer & smoker :D

I've given up one of those, but finding the other hard to quit. :D

[macduffy]

Jaa, well said. The "guarantee" is actually a govt provided insurance policy that financials almost have to buy if they're to be taken seriously. Anyone know how much govt has collected in "premiums" since the scheme was established?

I've heard that it cost finance companies around 1% of deposits/debentures covered, but can't vouch for that.

However much, it's bound to have been included - and spent - in the govt accounts, by now!

[upside_umop]

Give it a rest guys! I hardly think SCF is going to present the Treasury with a total loss, the estimate from those that should know is $600m, $150 each. Let alone the fees paid into the scheme!

I was and still am a big fan of the Government guarantee, it should be made permanent. In 2008 all the talk was about how NZ was one of the few developed countries without one. We all know if one of the big Aussie banks were to let their NZ operation fall over it would be bailed out by the government. The guarantee scheme forced them for the first time to pay for this implicit guarantee and boy did they hate it!

Once you included the foreign owned banks you had to include all the NZ non-banking deposit taking sector otherwise what was left of NZ finance inc would have been destroyed and make NZ even more of a branch office causing even more profits to flow overseas.

The guarantee scheme will probably end up breaking even in the long run and even if it doesn't $150 per person is a small price for everyone to pay to protect our economy, national interest and to allow an orderly wind down of all our excesses. Let alone the stress and poor health it has saved people.

Make the second version of the scheme (that had the benefit of hindsight and the refinement of time) permanent!

Permanent? That's how you would start a real moral hazard! Good one.

The govt will now be making a loss on the scheme.

[MrDevine]

Jaa I can see your rationale, however having a implicit guarantee on deposits distorts the market. Have you noticed what happened to the american housing market with Fannie and Freddie Mac with their implicit govt backing?

It's nuts. That rationale is no better than putting your money into a company you have little confidence in, but no worries the taxpayer will pick up the tab later. Confidence in your business has to be earned, then you profit from it. The only shambles out of this, is the total lack of regulation around these finance outfits who lent long and borrowed short, Gaynor has been going on about it ad nauseum in the Business Herald.

The RDGS should be scrapped very shortly.

I think the big banks were paying pretty high premiums to be in the scheme, but let's remember it was enacted in extraordinary times.

[Jaa]

Permanent? That's how you would start a real moral hazard! Good one.

The govt will now be making a loss on the scheme.

You couldn't be more wrong Upside! The scheme protects the depositors not the bank/finance company owners.

Have a look at the USA which has had a very successful deposit guarantee for a long time now which has been self-funding. The FDIC cleans up bank failures at no loss to depositors very efficiently. Also has the side affect of forcing people to spread their deposits around (max of $100k now $250k per institution) which can only be a good thing as it helps prevents any one institution becoming to big to fail.

[peat]

You couldn't be more wrong Upside! The scheme protects the depositors not the bank/finance company owners.

Sure but because the depositors find it unneccessary to do due diligence on their bank/finance co it creates a false competition to produce higher returns thus generating moral hazard at the banker level.

[Hoop]

Someone needs a new calculator. It works out to $45,714.29 on average each.

Interesting way that Treasury are doing this. A little bit of vested interest with ceretain people in the corridors of power that otherwise wouldn't have been eligable perhaps ??

Apparently Hubbard has poured a lot of money in ...is he covered by the Guarantee scheme?

[minimoke]

I've heard that it cost finance companies around 1% of deposits/debentures covered, but can't vouch for that.

The fee is on a sliding scale - depending on the Credit rating of the Finance Company at the time of entry into the scheme. As I recall SCF came in at BB (whatever - it was the very lowest available) but since then plummeted to its current level

[MrDevine]

Jaa I think you'd best to do a bit more research on the US Banking system which is a shambles, because of precisely what you're talking about. The FDIC does attempt to manage an orderly wind down of troubled regaional banks. If you're talking TBTF, can you please rationalise how the following banks are not to big to fail: Citigroup, Bank of America, Wells Fargo, JP Morgan Chase?

[minimoke]

Apparently Hubbard has poured a lot of money in ...is he covered by the Guarantee scheme?

Given the way he has structured his entities theres bound to be one or two in there somewhere which has deposits eligible for the Guarantee. But on the whole, with the "equity" he pumped in, he'll sit behind Torchlight and the Govt.

[Jaa]

Jaa I can see your rationale, however having a implicit guarantee on deposits distorts the market. Have you noticed what happened to the american housing market with Fannie and Freddie Mac with their implicit govt backing?

Thats my point though MrDevine, its implicit guarantees that cause problems not explicit self-funding guarantees like the FDIC in the US or our own extended guarantee. SCF at least contributed to the taxpayer payout, the BNZ never did. If the scheme had been enacted in normal times the government wouldn't have lost a thing.


Sure but because the depositors find it unneccessary to do due diligence on their bank/finance co it creates a false competition to produce higher returns thus generating moral hazard at the banker level.

I think your being unrealistic, most people wouldn't even know what due diligence is let alone know how to do it! Doesn't mean they do not deserve protecting from the sharks of the world.

[peat]

due diligence for a layman depositor to some extent could mean judging whether an interest rate is feasible or not....even simple people know there is no free lunch in a real world (only in a govt g'tee world)
I dont mean to imply everyone reads Westpac's books

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670059

• Blanket guarantees add substantially to fiscal costs of crises
• They are not necessarily successful in restoring public confidence
• And they add little to the recovery process
• Therefore indiscriminate guarantees should be avoided

[minimoke]

AH has release a statement in which he says "It has been deeply frustrating and hurtful, over the last nine months, to have been sidelined by my fellow SCF directors, and subsequently straight-jacketed by the Government regulators, from working to save South Canterbury,"

I can't help but feel he might be better served by keeping quiet for a while!

[winner69]

AH has release a statement in which he says "It has been deeply frustrating and hurtful, over the last nine months, to have been sidelined by my fellow SCF directors, and subsequently straight-jacketed by the Government regulators, from working to save South Canterbury,"

I can't help but feel he might be better served by keeping quiet for a while!

Prob been in La La land for a while now .... possibly the Stat Man was a proxy for what happens when some families use a Power a Attorney when the old ones get a bit old and start lsoing the plot ..... ouch thats mean

[minimoke]

Prob been in La La land for a while now .... possibly the Stat Man was a proxy for what happens when some families use a Power a Attorney when the old ones get a bit old and start lsoing the plot ..... ouch thats meanInvestors and "Cultists" seem to have fond memories of the AH of the past.

An unfortunate reality they appear to have lost sight of is the effect of dialysis on a person. A person on dialysis is at risk of hypertension, dialysis dementia, depression, suicide and self harm, delirium, anxiety and panic,stress, There are also psychiatric implications with the medications taken by a patient.

Now is a time when AH really needs his friends (not the psycophants that currently seem to lurk in Timaru) to protect him from the inevitable fallout. Its a shame some of these friends weren't around a few years earlier.

[minimoke]

Toss a pebble into the recivership pond and see what turns up. These compnaies are also under recievership
- Belfast Park Limited
- Tyrone Estates Limited
- Braebrook Properties Limited
- FACE Finance Limited
- Fairfield Finance Limited
- Flexi Lease Limited
- Rental Cars Limited
- Galway Park Limited
- Helicopter Nominees Limited
- Hornchurch Limited
- SCFG Systems Limited
- Sophia Investments Limited
- Southbury Insurance Limited

Also interesting the Recievers have expertise in forensic accounting!

[winner69]

I've wondered for a while that even when AH and his wife were in Stat Manand his mates at SCF told AH to take a jump Alan and Jean still seemed to be going down the office and have been shown as beavering away doing the books

DO they look after a lot of other entities as well?

[winner69]

I note Alan resigned as a director of some of those companies yesterday .... switched his activities from personally signign all the debentures to resignation notices

[winner69]

Toss a pebble into the recivership pond and see what turns up. These compnaies are also under recievership
- Belfast Park Limited
- Tyrone Estates Limited
- Braebrook Properties Limited
- FACE Finance Limited
- Fairfield Finance Limited
- Flexi Lease Limited
- Rental Cars Limited
- Galway Park Limited
- Helicopter Nominees Limited
- Hornchurch Limited
- SCFG Systems Limited
- Sophia Investments Limited
- Southbury Insurance Limited

Also interesting the Recievers have expertise in forensic accounting!

Suppose thats just the start of a long list ... wonder when Southbury Corp joins it

[trout]

so what about the likes of Hubbards company Plum Duff ?

[minimoke]

so what about the likes of Hubbards company Plum Duff ?
???. The Hubards are under Stat Man. SCF is in receivership.

[minimoke]

Do you really think the Timaru grannies have the slightest bit of knowledge of the workings Dep Guarantee. I don't think they had a clue - instead they just blindly put their money into SCF to"support that nice Mr Hubbard who has done so much for the region over the decades". I hold POA for a depositor so I'll see just how long it does take to get the loot back.
Not only do depositors get 8.5% for the privledge of putting there money in an institution where there was no risk of getting their money back within the guarantee period they also get to leapfrog all the Allied National and other failed company depositors. Govt is today handling over $1.6b to the Trustee who will pay depositors directly.

Cerainly a pragmatic approach - but the way we invest in the future is going to be different.

[peat]

I havent noticed that much pressure on Kiwi apart from the usual USD factor but perhaps a bit
Eur/NZD is up - I took a few ;+)

I think from that perspective the govt has handled the situation reasonably well..... i.e by taking control they've prevented a carnage scenario being mooted

[QOH]

Can anyone confirm whether interest on the debentures ceases today, or continues until they are repaid.
Looks like there will be a lot of money out there looking for a new home.

[Beagle]

Can anyone confirm whether interest on the debentures ceases today, or continues until they are repaid.
Looks like there will be a lot of money out there looking for a new home.

See Treasury Website. Interest at whatever rate you've been earning ceases today but interest at the OCR rate continues, currently 3% per annum, seems fair to me.

Interestingly the real winners from today's news are SCF010 bond holders, the long bonds, Dec 2012. These traded in recent times at yields up to 40%, around 60 cents in the dollar. Good news for them today.

[upside_umop]

Interestingly the real winners from today's news are SCF010 bond holders, the long bonds, Dec 2012. These traded in recent times at yields up to 40%, around 60 cents in the dollar. Good news for them today.

I find that ridiculous. I haven't looked into the fine details of it, but why in world are the govt paying out these guys when they were never part of the original deposit scheme?! I don't mind paying out original depositors under the scheme, but throwing $125m away to people that have been rewarded greater for the risk they knew they were taking on seems stupid. Is there something I'm missing? Jaa seems to think SCF010 were always part of the scheme? Clearly in my mind the 60 cents in dollar bit shows they weren't!

[Beagle]

Investors and "Cultists" seem to have fond memories of the AH of the past.

An unfortunate reality they appear to have lost sight of is the effect of dialysis on a person. A person on dialysis is at risk of hypertension, dialysis dementia, depression, suicide and self harm, delirium, anxiety and panic,stress, There are also psychiatric implications with the medications taken by a patient.

Now is a time when AH really needs his friends (not the psycophants that currently seem to lurk in Timaru) to protect him from the inevitable fallout. Its a shame some of these friends weren't around a few years earlier.

Thanks for giving an over-view of the effects of dialysis. I'm not trying to be a smart a#se but perhaps if the effects are that profound he sould have stepped down years ago and if in fact he was mentally compromised isn't this a material fact that should have been discolsed in the investment statement and prospectus.

I for one had no idea the effects of this illness were so serious.

[Beagle]

I find that ridiculous. I haven't looked into the fine details of it, but why in world are the govt paying out these guys when they were never part of the original deposit scheme?! I don't mind paying out original depositors under the scheme, but throwing $125m away to people that have been rewarded greater for the risk they knew they were taking on seems stupid. Is there something I'm missing? Jaa seems to think SCF010 were always part of the scheme? Clearly in my mind the 60 cents in dollar bit shows they weren't!

I think there were a lot of sceptics, myself included, who wondered if these bonds would be paid out but apparently a default event triggers early repayment, and as at that occurred within the scheme's tenure they will be paid out in full.

I also find it morally reprehensible that these speculators have reaped a reward as high as 67%, (100/60) on the back of taxpayers expense. I hope the I.R.D. does an audit of those taxpayers who bought large volumes of these securities in recent months to ensure they are declaring their profits, in fact I think as an accountant I have a duty of care to the taxpayer to bring this to the Commissioner's attention.....

[winner69]

I think there was a lot of sceptics, myself included that these bonds would be paid out but apparently a default event triggers early repayment as at that occurred within the scheme's tenure they will be paid out in full. I also find it morally repugnant that these investors have reaped a reward as high as 67%, (100/60) on the back of taxpayers expense. I hope the I.R.D. does an audit of those taxpayers who bought large volumes of these securities in recent months to ensure they are declaring their profits, in fact I think as an accountant I have a duty of care to the taxpayer to bring this to the Commissioner's attention.....

Lost my $3,000 on the prefs but more than made that up on the bonds ..... and yes Roger I will declare the capital gains on these .... in normal course of events such gains are classed as income anyway .... you dont get the chance to call yourself a trader or not .... thats how i see it

[upside_umop]

Lost my $3,000 on the prefs but more than made that up on the bonds ..... and yes Roger I will declare the capital gains on these .... in normal course of events such gains are classed as income anyway .... you dont get the chance to call yourself a trader or not .... thats how i see it

All depends what your intention was winner. I'm not sure these gains would be classed as income if you 'intended' to hold them through to maturity :P

Hmmm I never knew that little loophole existed. Seemed a pretty good bet then, as it looked like it was just a vicious cycle and was certain to come down before the end of 2011.

[Dubdee]

All gains on financial arrangements are subject to tax. The gain is what you got in less what you paid out. So anyone who got a capital gain on the bonds if NZ resident is subject to tax. losses are also deductible but subject to a test relating to the reason for the loss. if it was due to faliure of the issuer, reduction in their capacity to pay etc the loss is non deductible.

Thats why its best to hold all fixed income in a trading company. Then any losses for whatever reason are deductible.

[MrDevine]

Sandy says 'Spend it wisely' – I say give it back

http://www.nbr.co.nz/article/scf-bondholders-rejoice-told-spend-cash-wisely-129209

[sharer]

All gains on financial arrangements are subject to tax. The gain is what you got in less what you paid out. So anyone who got a capital gain on the bonds if NZ resident is subject to tax. losses are also deductible but subject to a test relating to the reason for the loss. if it was due to faliure of the issuer, reduction in their capacity to pay etc the loss is non deductible.
Thats why its best to hold all fixed income in a trading company. Then any losses for whatever reason are deductible.

Thanks for that Dubdee - clarified some points for me. Must attend to further tidying up my estate very soon!
Too late now of course, but maybe still of interest: What if my trading company had held SCFHAs - now valueless - would that loss have been deductible?
Or would the rule re failure of the issuer have made the loss non-deductible?

[Danthetitan]

Thanks for that Dubdee - clarified some points for me. Must attend to further tidying up my estate very soon!
Too late now of course, but maybe still of interest: What if my trading company had held SCFHAs - now valueless - would that loss have been deductible?
Or would the rule re failure of the issuer have made the loss non-deductible?

SCFHAs are not financial arrangements so they are the same as ordinary shares.

[sharer]

SCFHAs are not financial arrangements so they are the same as ordinary shares.
Thanks DantheTitan.

[minimoke]

Apparently SCF have been doing no lending this year. But didn't the Prospectus give an indication that investors money would go into certain types of loans (home loans, boats etc). So the money has been used to pay interest to existing depositors. Thats probably given those depositors comfort that the loans there money was sent to were performing. Clearly not. So if all money raised this year didn't go into new loans - there must have been a huge lack of income from existing loans and massive impairments would no doubt have been reported in the YE accounts.

[Beagle]

My thinking is that if you bought the SCFHA's with the intention of making a profit and I would have thought that's most of the punters in recent times, and would have declared the profit if you made it, I can't see a valid reason why you can't claim the loss. If anyone has any case law on this I'd be interested in seeing a link to it.

[winner69]

Apparently SCF have been doing no lending this year. But didn't the Prospectus give an indication that investors money would go into certain types of loans (home loans, boats etc). So the money has been used to pay interest to existing depositors. Thats probably given those depositors comfort that the loans there money was sent to were performing. Clearly not. So if all money raised this year didn't go into new loans - there must have been a huge lack of income from existing loans and massive impairments would no doubt have been reported in the YE accounts.

We (taxpayer) all got screwed eh mate ... unintended consequence of a good idea and moral hazard and all those sort of things

[Contrarian]

Gidday
Appears $125 Mill scf010 Grinning all the way to the bank & $100 Mill SCFHA very dubious.

Face value interest was 10.43% & 5.61% so there wasn't a good risk/reward equation there.

[upside_umop]

All gains on financial arrangements are subject to tax. The gain is what you got in less what you paid out. So anyone who got a capital gain on the bonds if NZ resident is subject to tax. losses are also deductible but subject to a test relating to the reason for the loss. if it was due to faliure of the issuer, reduction in their capacity to pay etc the loss is non deductible.

Thats why its best to hold all fixed income in a trading company. Then any losses for whatever reason are deductible.

Well, you learn two things new a day....in my case I did. Interesting. Cheers :)

[Balance]

I think there were a lot of sceptics, myself included, who wondered if these bonds would be paid out but apparently a default event triggers early repayment, and as at that occurred within the scheme's tenure they will be paid out in full.

I also find it morally reprehensible that these speculators have reaped a reward as high as 67%, (100/60) on the back of taxpayers expense. I hope the I.R.D. does an audit of those taxpayers who bought large volumes of these securities in recent months to ensure they are declaring their profits, in fact I think as an accountant I have a duty of care to the taxpayer to bring this to the Commissioner's attention.....

The bonds are fixed interest securities - any difference between purchase and redemption/maturity values are treated as taxable gains or losses. That's my understanding from 20 years ago.

[winner69]

FORMER CHIEF EXECUTIVE 'GUTTED'




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

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

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

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

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

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

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

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

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

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

http://www.stuff.co.nz/timaru-herald/news/4078276/Receivership-is-a-disaster-supporters-say

[jmsnz]

Oh Lachie, give us all a break. We all work hard!!!

[Onthemoney]

Yeah Lachie go back to the shelter. You sure wrote a lot of business. Just shows what an ex trading bank manager is like when he is let out of his cage.

[moimoi]

It seems that all shareholders in the likes of Feltex and Cadmus needed was a decent Facebook page and a bit of potty raving about the injustice of it all.

And the government apparently wants to reduce the punters glee for property investment...how about starting by not bailing out a property development finance company.!

A fair scent of megalomania wafting up from down Timaru way....

[miner]

So how many NZ finance company's is it now that have gone toes up due to bad property loans ?.

[peat]

So how many NZ finance company's is it now that have gone toes up due to bad property loans ?.

miner
63 now
see http://www.interest.co.nz/saving/deep-freeze-list/

[minimoke]

So how many NZ finance company's is it now that have gone toes up due to bad property loans ?.
Or alternatively check out page one of teh "sharetrader 2007 Divestor" thread over in the NZX part of the forum. The writing has been on the wall for oh such a long time.

[GTM 3442]

So how many NZ finance company's is it now that have gone toes up due to bad property loans ?.


More than survived ?

[minimoke]

More than survived ?
By my reckoning 34 survivors out of 72.

[upside_umop]

Risky Loans Followed Guarantee
South Canterbury Finance ramped up its risky real estate loans after it signed up to the Government's scheme that protected its investors' money, the company's chief executive Sandy Maier said last night.

See the full article here...

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670285

[Toddy]

Ok, lets start to build a list of what the property loan and bad toxic book looks like based on the info that is out there.

Would our Wellington mate Terry S be in the good books or the bad book.

[Winston]

Lending borrowed money to your property development mates was a logical respose to the Govt. Guarantee.
If the speculative development was sold before the end of the boom cycle everyone made a lot of money without having to risk any of their own capital.
If it failed then only the taxpayer loses. And the holders of SCFHA.

[J R Ewing]

Lending borrowed money to your property development mates was a logical respose to the Govt. Guarantee.
If the speculative development was sold before the end of the boom cycle everyone made a lot of money without having to risk any of their own capital.
If it failed then only the taxpayer loses. And the holders of SCFHA.

In snooker terms a perfect "shot to nothing". A longshot that might go in on a lucky day but leaves the opponent (the taxpayer) badly placed for his turn if it misses.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670285

Sandy Maier himself, all but says the risky lending was stupid. I want to higlight the FACT that Lachie McLeod during his tenure was SOLELY responsible for approving all loans over $1m, (source 2008 Prospectus).

No credit committee, no proper proceedures, just Lachie McLeod running the Titanic straight into the Iceburg at full speed, (greedily trying to boost his personal bonus), while the owner was in his cabin getting dialysis treatment...as simple as that.

For McLeod to come out now and say nobody worked as hard as him is truly galling.

I'm happy to go into print and say NOBODY lended as recklessly and with such willy nilly gay abandon as Lachie McLeod in the entire 84 year history of this company. The company was damaged beyond repair on his watch and the best thing he can now do is shut up. It makes me very angry as a taxpayer to read McLeods B.S. rantings.

Go back to cleaning the dags of the backsides of your sheep Lachie, that's ALL your good for now...

[Beagle]

...sorry guys for that rant...I feel a bit better now, where's that cup of tea.......

[minimoke]

[url]htt
For McLeod to come out now and say nobody worked as hard as him is truly galling.

Are these people barking mad?

Lachie got his $15m off the tax payer since that debt appears to have been forgiven by SCF since they had an inflow of funds protected by the Deposit guarantee. He should stay quiet.

Alan Hubbard is clearly unwell and the SFO haven't yet dropped their investigation against him. His friends should surround him and help him to stay quiet.

Margaret Hubbard should stick to looking after her ill husband and feeding the cat - she should stay quiet.

Paul Carruthers has lead the sheep over a cliff. He should stay quiet.

EUFA clearly don't know what they stand for. Unacceptable Financial Activities have been exposed despite their best efforts to halt those enquiries - they should stay quiet.

Labour introduced the Deposit Guarantee without sufficient taxpayer protections - they should stay quiet.

The Greens - well wast would they know!

I hope we hear enough from the Recievers, Governemtn and Regulators to educate future investors on the perils associated with thoughtless "investment"

[minimoke]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670285

I want to higlight the FACT that Lachie McLeod during his tenure was SOLELY responsible for approving all loans over $1m, (source 2008 Prospectus).

I would imagine (but stand to be corrected) that the Chief Executive would have been approving loans under guidelines set by the Board. The Board would set these guidelines with the interests of shareholders in mind. Spin the bone how we like it still ends up pointing to Alan

[Marilyn Munroe]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670285

Sandy Maier himself, all but says the risky lending was stupid. I want to higlight the FACT that Lachie McLeod during his tenure was SOLELY responsible for approving all loans over $1m, (source 2008 Prospectus).

No credit committee, no proper proceedures, just Lachie McLeod running the Titanic straight into the Iceburg at full speed, (greedily trying to boost his personal bonus), while the owner was in his cabin getting dialysis treatment...as simple as that.

For McLeod to come out now and say nobody worked as hard as him is truly galling.

I'm happy to go into print and say NOBODY lended as recklessly and with such willy nilly gay abandon as Lachie McLeod in the entire 84 year history of this company. The company was damaged beyond repair on his watch and the best thing he can now do is shut up. It makes me very angry as a taxpayer to read McLeods B.S. rantings.

Go back to cleaning the dags of the backsides of your sheep Lachie, that's ALL your good for now...

Now Roger, You are being too harsh on Lachie.

He does have one financial skill, moving money out the door fast without regard for the consequences.

With this skill-set in mind I propose that Lachie be appointed as chairman of the US Federal Reserve.

Imagine this conversation;

President Obummer to new fed chairman Lachie, "We want to get this economy moving on up whatever the consequences, We have chosen you because of your record. Now get cracking."

Boop boop de do

Marilyn

[Beagle]

I would imagine (but stand to be corrected) that the Chief Executive would have been approving loans under guidelines set by the Board. The Board would set these guidelines with the interests of shareholders in mind. Spin the bone how we like it still ends up pointing to Alan

Mate, you hit the nail well and truly squarely on the head with your post yesterday. Alan has not been well for quite some time. The word seems to be that he choose Lachie against better advice from his close friends, mainly becuase he could control him, but as his health has steadily failed those controls, or lack thereof in latter years and Alan's clearly impaired judgement have sunk the ship.

As you put it this morning, they need to keep quiet, I think the reckless way these two mismanaged the company could well see the cold light of day in court in either a civil or criminal case. There has to be some seriously disgruntled preference shareholders out there, I know one that springs to mind, perhaps unsurprisingly he's been AWOL from this thread for a couple of days now and one suspects for quite some time longer as he licks his wounds.

[Beagle]

Now Roger, You are being too harsh on Lachie.

He does have one financial skill, moving money out the door fast without regard for the consequences.

With this skill-set in mind I propose that Lachie be appointed as chairman of the US Federal Reserve.


Imagine this conversation;

President Obummer to new fed chairman Lachie, "We want to get this economy moving on up whatever the consequences, We have chosen you because of your record. Now get cracking."

Boop boop de do

Marilyn

LOL, that's pure GOLD !!

[minimoke]

I think the reckless way these two mismanaged the company could well see the cold light of day in court in either a civil or criminal case.
Lets not forget there were several Board members and it is rumored that it was one of these Board Members who dobbed AH in with respect to Aorangi. I find it interesting that if that was the case that particular board member (or any other Board Member) did not see fit to remove AH (perhaps under Stat Man) from SCF several years ago. No doubt there was a significant amount of self interest and lining of ones own pockets while the cash was flowing.

Some people have reserved their disdain solely for Hotchin / Watson / Byers et al - I wonder if they will, over time, change their position and add a few more names to that list.

[evilroyrule]

Now Roger, You are being too harsh on Lachie.

He does have one financial skill, moving money out the door fast without regard for the consequences.

With this skill-set in mind I propose that Lachie be appointed as chairman of the US Federal Reserve.

Imagine this conversation;

President Obummer to new fed chairman Lachie, "We want to get this economy moving on up whatever the consequences, We have chosen you because of your record. Now get cracking."

Boop boop de do



Marilyn

great, marilyn, i am so glad i found you. can you tell me if you have seen MJ or the King, most likely they are hanging out together. I need to tell them that (dirty) diana is looking for them

[Billy Boy]

Are these people barking mad?

Lachie got his $15m off the tax payer since that debt appears to have been forgiven by SCF since they had an inflow of funds protected by the Deposit guarantee. He should stay quiet.

Alan Hubbard is clearly unwell and the SFO haven't yet dropped their investigation against him. His friends should surround him and help him to stay quiet.

Margaret Hubbard should stick to looking after her ill husband and feeding the cat - she should stay quiet.

Paul Carruthers has lead the sheep over a cliff. He should stay quiet.

EUFA clearly don't know what they stand for. Unacceptable Financial Activities have been exposed despite their best efforts to halt those enquiries - they should stay quiet.

Labour introduced the Deposit Guarantee without sufficient taxpayer protections - they should stay quiet.

The Greens - well wast would they know!

I hope we hear enough from the Recievers, Governemtn and Regulators to educate future investors on the perils associated with thoughtless "investment"

minimoke old son
thats the best post you have made on the subject.
I was beginning to lose faith in you !!
BB

[Beagle]

Lets not forget there were several Board members and it is rumored that it was one of these Board Members who dobbed AH in with respect to Aorangi. I find it interesting that if that was the case that particular board member (or any other Board Member) did not see fit to remove AH (perhaps under Stat Man) from SCF several years ago. No doubt there was a significant amount of self interest and lining of ones own pockets while the cash was flowing.

Some people have reserved their disdain solely for Hotchin / Watson / Byers et al - I wonder if they will, over time, change their position and add a few more names to that list.

I think so !!

BTW I agree with Billy Boy, that was a great post.

[minimoke]

minimoke old son
thats the best post you have made on the subject.
I was beginning to lose faith in you !!
BBHere was me thinking that all my posts on the issue since 2007 have consistently been on the inevitability of the events that occurred yesterday. That I have made at least one post that has contributed to the discussion fills my heart with joy.

[Beagle]

http://www.stuff.co.nz/business/4081604/Govt-intends-to-sell-off-South-Canterbury-Finance

Look at some of the words reported from what John Key had to say in his press conference today...

Many of the loans were on assets that had NO value. Many of the loans are "bonfire material"

If this isn't thinly disguised contempt for how SCF was run, I don't know what is !!

[Newman]

Many of you would get your money back from the Government. Where are you going to put/invest the money? Any interest to discuss companies/bonds worth to invest?

[Winston]

Presumably the 'loans on assets that had no value' were made to parties in some way known or assoiated with SCF.
It was after all 'free money,' as they say in the industry, and they might just get away with it if no one gives a stuff about the long-suffering taxpayer or the shareholders.

[Beagle]

Many of you would get your money back from the Government. Where are you going to put/invest the money? Any interest to discuss companies/bonds worth to invest?

See my earlier comments on KIPGC, see also www.kipt.co.nz

Quality is the name of the game while the GFC still rages on, in my opinion.

Disclosure of Interest - I have lots of this security.

[QOH]

Many of you would get your money back from the Government. Where are you going to put/invest the money? Any interest to discuss companies/bonds worth to invest?

I'm interested, keen to hear some suggestions.
I think I must have been one of last buyers of SCF020's, settled the account on Monday.

[minimoke]

By my reckoning 34 survivors out of 72.

Oops - just checked my list from 2007. Actually 26 survivors from the original 72. That is one hell of a lot of red ink!

[Capitalist]

Sandy is in fine form - putting the blame right where it belongs:

"A fish kind of stinks from the head. These assets didn’t hop on our books by themselves and these related party loans didn’t make themselves. People mismanaged the place frankly.”
SCF had been "a very sub-standard business for a very long time" and paid a big price for that.

The fish that stinks is Hubbard. Link: http://www.interest.co.nz/news/sandy-maier-says-demise-south-canterbury-finance-ultimately-traces-back-allan-hubbard

[minimoke]

http://www.stuff.co.nz/business/4081604/Govt-intends-to-sell-off-South-Canterbury-Finance

Look at some of the words reported from what John Key had to say in his press conference today...

Many of the loans were on assets that had NO value. Many of the loans are "bonfire material"

If this isn't thinly disguised contempt for how SCF was run, I don't know what is !!
So if there has been no new lending this year how on earth did SCF get approved into the extended scheme. There were probably enough breaches for it to be kicked out of the original scheme. Quite clearly Sandy was put in as a Stat Manager and we have all been played for fools since late last year.

[Balance]

Sandy Maier is coming out swinging so expect plenty of revelations by him if the Hubbard camp does not play fair. Sandy is a self-made man with a limited time-span interest in any projects. Anyone thinking he needed the SCF job for livelihood has no idea who they are dealing with!

He has had close look at the books and loans of SCF - what a tale they will tell.

[minimoke]

So by June something like $200m in debentures had agreed to roll over. Why did they continue the pretense. As tax payers we've been sucked into paying 8.5% to the twits that continued supporting AH. Before the government allowed tax payers to support SCF as they flew into unchartered territory of high risk property investment at the top of the cycle. There was no risk - SCF know the good ol' tax payer will be there (just like with Kiwisaver) to stuff the finance companies pockets full of loot. Just wait till the Govt lets ACC loose - we'll be bent over and shafted once again by the money people who stand behind the schemes that will get set up.

[Winston]

'these related party loans didn't make themselves' ; Sandy Maier.

Are these tranactions still legal when they are being made under the Govt. Guarantee acheme?

[winner69]

TV tonight showed Alan and Jean going to the office today just like nothing has happened .... and they tioled dilengently away at their ledgers

Surely the Stat Man not got him working on Aorangi / Hubbard business .... his mates sacked him from SCF .... Alan and Jean in Stat Mgt so should only be doing what the Stat man says

So what the heck are they up to I wonder .... maybe as punishment he has to sign every one of the 35,000 refund cheques personally .... at least that way it could look like HE did repay all his investors

[Beagle]

SCF had been "a very sub-standard business for a very long time" and paid a big price for that

Sandy Maier.

The Independent ran an article in late 2009 that basically said Sandy Maier was a quassi SM appointment and the new directors were Govt sanctioned appointments, looks like a veryaccurate article with the benifet of some hindsight.

What I find disturbing is that clearly AH has been so unwell for so long, at least three years and he's clearly made some extremly poor decisions in recent times. Many investors invested based on this man's integrity and strength of character, yet how come his serious illness was never disclosed in the propectus and investment statements in 2008 and 2009 ?

If this isn't with-holding material information then what is it ? Constructive, Fradulent concealment, or am I drawing too long a bow ?

[Beagle]

So if there has been no new lending this year how on earth did SCF get approved into the extended scheme. There were probably enough breaches for it to be kicked out of the original scheme. Quite clearly Sandy was put in as a Stat Manager and we have all been played for fools since late last year.

Mate, I think its been clear for many months that the Govt gave them "soft" entry into the extended scheme in the vain hope they could do a deal that would mitigate their loss. They knew without entry into the extended scheme it was as good as writing an instant cheque for $1.7b, which of course is what happenned in the end.

When you look back at some of Sandy Maier's comments, especially the one where he said the business was breaking even for the quarter ended 31 March 2010, its clear there was an "organised" campaign to be extremly creative with the truth.

I've commented several times on how SCF financial statements were the most creative i've ever seen in 30 years of being an accountant. Frankly, if I was a major preference shareholder I'd be suing the directors personally for a number of things. I'd also be gunning for the previous Auditors, so I hope all those parties have their professional indemnity insurance premiums fully paid up as I am sure someone will have a very good go at them.

[jmsnz]

If this isn't with-holding material information then what is it ? Constructive, Fradulent concealment, or am I drawing too long a bow ?
Roger,

I agree with much of what you say, but I think that is a bit of a long bow for several reasons.

1) Those that bother to read the investment statement, probably had enough general knowledge of the situation to know about the health issues
2) For those that don't bother to read the investment statements, AH's health was unlikely to change their minds
3) What other companies in NZ disclose personal health issues of their directors and/or senior staff, so why should SCF

All in all though, many involved with SCF have obviously been economical with the truth for some time, including Sandy.

[Winston]

I would like to believe that the law actually does have some teeth!

[winner69]

SO it was the rich that played a part in the demise of SCF .... taking their money out to get below the $250k limit to get the govt guarantee

So those punters had no faith in Alan to look after them ... to put them right ..... they only had faith in the govt eh

[Stranger_Danger]

Long term, having faith in Governments could prove equally dumb.

[minimoke]

When you look back at some of Sandy Maier's comments, especially the one where he said the business was breaking even for the quarter ended 31 March 2010, its clear there was an "organised" campaign to be extremly creative with the truth.


And that is something I have a major problem with. Investors in the NZ financial markets should be able to rely on the validity of the statements made by the Chief Executive of a company. If we look back at the statements he made to the NZX and to the press the NZ Investor has been mislead.

Even the government has been economical with the truth - who knew until yesterday that KordiaMentha had been advising them for the past year.

Once again we have been taken for a ride by the inadequate reporting by SCF and a patriarchal government who, in the best of nanny stat mentality thinks "we know best - those wee voters know jack **** so best we don't tell them anything and look after them without their consent.

[Beagle]

And that is something I have a major problem with. Investors in the NZ financial markets should be able to rely on the validity of the statements made by the Chief Executive of a company. If we look back at the statements he made to the NZX and to the press the NZ Investor has been mislead.

Even the government has been economical with the truth - who knew until yesterday that KordiaMentha had been advising them for the past year.

Once again we have been taken for a ride by the inadequate reporting by SCF and a patriarchal government who, in the best of nanny stat mentality thinks "we know best - those wee voters know jack **** so best we don't tell them anything and look after them without their consent.

Let the lawsuits against the Directors and CEO begin, if I had sufferred any injury from the collapse of SCF I'd be in boots and all. Fortunatly I could see the balance sheet was riddled with more toxic matters than you could shake a stick at...remember I predicted another financial nuke bomb would go off in SCF accounts for the year ended 30 June 2010, IF they ever saw the light of day.

There are definitly grounds to sue here and I'd advise anyone who has sufferred a substantial loss on SCF preference shares to be talking to a good securities lawyer.

The financial statements are an absolute scandal and have been for some time. The mis-information is a huge scandal, the related party lending is a huge scandal, the treatment of tax losses e.t.c.

For the record I read the prospectus and investment statements several times and until the recent Listener article I had no idea about AH's illness.

There's a parallel with Apple's situation and the CEO's health issues there and I can't remmeber how that was handled but I am sure it was better handled than the way SCF mis-managed ALL their issues.

[minimoke]

For the record I read the prospectus and investment statements several times and until the recent Listener article I had no idea about AH's illness.


There is a poster in this Forum (though I haven't seen him in this thread), Duncan Mcregor. One of his investing techniques is to talk to the "tea lady". Posters have scoffed at it his approach but clearly in the case of SCF it has merit.

I'm not sure companies should be required to declare the state of health of their senior executives or board directors. If they were to do so we would also need to draw conclusions from a persons age, their sexual orientation or any thing else we might have a bias against. However investors might be well advised to look beyond the financial reports and prospectus and do their own investigations into the personal issues of the senior exec. I have three companies I might be tempted to invest in except I know things which aren't in the accounts and that keeps me out of those companies - however another person may draw a different conclusion to me and should be free to invest accordingly.

That is why we must be able to rely absolutely on the statements put out by the company. Lianne Dalziel fiddled while the financial instruments in Rome burned and since then we haven't seen significant change. The courts have said Feltex directors are quite able to rely on the expert advisors of its professional advisors - so they have no liability or responsibility for inadequate reporting. As investors in NZ we clearly aren't - we are all just players in a crapshoot.

[Toddy]

Rumour has it that the Govt is going to merge the bad book with Kiwi Rail.

[Beagle]

That is why we must be able to rely absolutely on the statements put out by the company. Lianne Dalziel fiddled while the financial instruments in Rome burned and since then we haven't seen significant change. The courts have said Feltex directors are quite able to rely on the expert advisors of its professional advisors - so they have no liability or responsibility for inadequate reporting. As investors in NZ we clearly aren't - we are all just players in a crapshoot. Minimoke

Cheer up mate, fortunatly that was just one family court judge that has a limited understanding of the commerical world. The level of director reposibility required will be tested in a proper case soon...

The Securities Act is under review, we have a new "so called" super reulator coming into being early next year so hopefully there will be SOME improvement. Having said that my understanding is that on a per capita basis the Australian Securities Commission is funded approximatly ten times as well as our regulators, so until the Govt gets really serious about resourcing the regulatory bodies in an appropriate manner and having punishment's that fit the seriousness of the crime, (none of this home dentention rubbish staying in their multi million dollar waterfront mansions for 12 months), whilst we may see some improvement, I fear we will still be the wild west for some time to come.

[Marilyn Munroe]

Roger said: "I fear we will still be the wild west for some time to come."

Times such as these remind me of a verse from the American folk singer Woody Guthrie's song Pretty Boy Floyd.

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

Boop boop de do

Marilyn

[fungus pudding]

Boop boop de do

Marilyn

I always though you sang 'boo boop be doo'. Sure you're not an imposter, or have you just updated the lyrics?

[Dr_Who]

Rumour has it that the Govt is going to merge the bad book with Kiwi Rail.

Classsic! lol

It would be true if it was the Labour govt.

[Winston]

[QUOTE=Capitalist;317899]Sandy is in fine form - putting the blame right where it belongs:

"A fish kind of stinks from the head. These assets didn’t hop on our books by themselves and these related party loans didn’t make themselves. People mismanaged the place frankly.”


Ahh. Soles, tossed by a big wave onto a warm beach, Sandy.

[winner69]

What Emunerate outlined as well capitalised scaled down South Canty doing what it done well for 80 years or so will probably happen sooner than later. The receiver (ie the govt) will find a buyer who will put in a bit of cash and take over the good loan book and it will be business as usual (or at least as it was 5 years ago)

What Emunerate didn't seem to get was that 'things' had to happen to make all this possible ... if AH continued having any say in things nothing was possible. It has been pointed out a few times on this thread that those 'things' were happening in the background.

Whether govt 'intervention' and the 'lack of transperency' was a good thing or not is open to debate .... but sometimes 'things' have to happen in mysterious ways.

South Canty Finance will live to fight another day ..... investors got their money back .... shareholders lost out as they should have .... above all a good outcome in this case ..... even if there was some 'unfairness' or worries about the role of a govt in such matters

[Winston]

.... shareholders lost out as they should have ....


Forsyth Barr probably knew this when they underwrote the SCFHA issue and dumped it into their clients managed portfolios.

[winner69]

Forsyth Barr probably knew this when they underwrote the SCFHA issue and dumped it into their clients managed portfolios.


Did you see a couple of those pref shareholders on TV the other night .... methinks they didn't even know they were shareholders ... prob thought they were depositors or something

I'll lose my few thousand on the pref but it was a rationale bet on something irrational happening but it was a risk free bet because you could hedge it with buying some cheap bonds ... it wasn't investing per se it was betting and as Sandy said the croupiers in the casino paid out

[minimoke]

.... It has been pointed out a few times on this thread that those 'things' were happening in the background.

Just so we are clear a Ponzi scheme is a fraudulent scheme whereby investors are offered high returns and these returns are paid with money paid in by subsequent investors. The returns don't come form profits made.

Fraud is gaining money by deception for personal or other gain.

Affinity fraud is where a well respected, say, community, religious or business leader is used to prey on the vulnerable - such as the elderly, the unsophisticated and the greedy. The leader uses his influence to convince the investors his scheme is worth while.

I bet we will see nothing from the Regulators in respect of the information given by SCF or the management of SCF over the past nine months.

[fungus pudding]

Just so we are clear a Ponzi scheme is a fraudulent scheme whereby investors are offered high returns and these returns are paid with money paid in by subsequent investors. The returns don't come form profits made.


So is a company that keeps accepting deposits, thereby having sufficient cash to meet withdrawals, although it may be technically insolvent through questionable lending operating a ponzi scheme? Or is it only a ponzi scheme where the intention is simply to meet payments out of new funds. :confused:

[Beagle]

Forsyth Barr probably knew this when they underwrote the SCFHA issue and dumped it into their clients managed portfolios.

Yes if you're so lucky to be a Forsyth Barr cleint you would have been "sold" Feltex bonds, Feltex shares when they converted, Credit Sails, South Canterbury Finance Pref shares and so on. When I dealt with them I felt they OFTEN put their own interests ahead of their cleints and when there was an outstanding opportunity that came their way they used to have an in-house saying "TGFC" which is an acronym for "too good for clients" Be warned !!

On another subject has anyone noticed it was only a couple of months ago Sandy Maier was talking about there being $500m of toxic loans ringfenced inside the bad bank, suddenly its now $700 million with no explanation why its grown by 40%. What's the bet that by the time any buyer of the so called good bank has done thorough due dilligence, surprise surprise, the bad bank would have (for reasons completly unknown of course), grown to $900m or even $1 billion.

No wonder the Govt didn't want to bail out the bad bank part of the business, that's almost the entire company !!

[minimoke]

So is a company that keeps accepting deposits, thereby having sufficient cash to meet withdrawals, although it may be technically insolvent through questionable lending operating a ponzi scheme? Or is it only a ponzi scheme where the intention is simply to meet payments out of new funds. :confused:As a borrower all SCF's marketing collateral was very clear that money was available for home loans, personal loans, boats etc. I don't recall one bit of collateral thats said we'll pay you 8.5% for your money which we are going to use to pay off existing borrowers. Sure they talked about the "wall of Maturities" - but they also said they were making good with existing loans that were maturing and writedowns were under control with the majority of impairments done Dec 09. We now hear there was no new lending in 2010!

I don't think we even want to go down the track of trading while insolvent do we?

[Alan3285]

Just so we are clear a Ponzi scheme is a fraudulent scheme whereby investors are offered high returns and these returns are paid with money paid in by subsequent investors. The returns don't come form profits made.

By that definition, almost every bank in the world is a Ponzi scheme?

Most (if not all) banks borrow short and lend long - there is hardly (any?) one that could pay out all it depositors if they came knocking at the same time.

Alan.

[fungus pudding]

As a borrower all SCF's marketing collateral was very clear that money was available for home loans, personal loans, boats etc. I don't recall one bit of collateral thats said we'll pay you 8.5% for your money which we are going to use to pay off existing borrowers. Sure they talked about the "wall of Maturities" - but they also said they were making good with existing loans that were maturing and writedowns were under control with the majority of impairments done Dec 09. We now hear there was no new lending in 2010!

I don't think we even want to go down the track of trading while insolvent do we?

No. I was simply curious on the definition of a ponzi scheme. It's clear that the original scheme named after a Mr. Ponzi was a delberate fraud as have others been. e.g. Madhoff. But a company that was originally genuine but forgets to mention it is insolvent ?? IOW can an originally genuine scheme be labelled a ponzi ?

[minimoke]

By that definition, almost every bank in the world is a Ponzi scheme?

Most (if not all) banks borrow short and lend long - there is hardly (any?) one that could pay out all it depositors if they came knocking at the same time.

Alan.
No - most banks were offering up too 5.5%. SCF was offering a high rate to attract money. Most banks I agree borrow short and lend lang. SCF was borrowing short and not lending. Most banks make a profit - ANZ only made a $620m profit in the last nine months - plenty of cash to pay depositors as they became due. SCf didn't need to pay out depositors all at one time - sure there was a Wall of Debt - but it was only one of waves that were coming through

[minimoke]

IOW can an originally genuine scheme be labelled a ponzi ?
Because a backers circumstances change. Five years ago who would have thought AH would be under Stat Man and investigation by the SFO. When things change a persons motivation changes, they way they do business changes and ethics and morals become blurred and good buisness practice begins to test limits. At some point a line gets crossed between bad management and a deliberate attempt to mislead investors.

[basilcat]

Is that not their modus operandi?

[Winston]

Yes if you're so lucky to be a Forsyth Barr cleint you would have been "sold" Feltex bonds, Feltex shares when they converted, Credit Sails, South Canterbury Finance Pref shares and so on. When I dealt with them I felt they OFTEN put their own interests ahead of their cleints and when there was an outstanding opportunity that came their way they used to have an in-house saying "TGFC" which is an acronym for "too good for clients" Be warned !!:


Yes, my Forsyth Barr Managed Portfolio lost $15k on Feltex, $90k on 'Sails', $75k on SCFHA, etc. All stuff where there was a clear conflict of interest between profits for the manager or a sound investment for the client.

[Winston]

Just so we are clear a Ponzi scheme is a fraudulent scheme whereby investors are offered high returns and these returns are paid with money paid in by subsequent investors. The returns don't come form profits made.

Fraud is gaining money by deception for personal or other gain.

Affinity fraud is where a well respected, say, community, religious or business leader is used to prey on the vulnerable - such as the elderly, the unsophisticated and the greedy. The leader uses his influence to convince the investors his scheme is worth while.:





Surely the vested interest that an underwriter has in placing an issue makes it as fraudulent to use the trust given by a client for personal gain as 'affinity fraud'.

[minimoke]

Is that not their modus operandi?
And are we learning? 2 companies on my list below are offering over 10%. Both belong to the Revised Deposit Guarantee and one of them is only covering deposits to 1 January 2010.


With the wisdom of hindsight my picks are:
1) LDC Finance - gone Sept 07
2) Finance and Investments - gone Sept 07
3) Nathans Finance - Gone Aug 07
4) Bridgecorp- Gone July 07
5) Five Star Consumer Finance- gone April 07
6) National Finance 2000 - Gone May 06
7) Provincial Finance Limited- Gone June 06
8) Property Finance Group - gone Aug 07
9) Western Bay Finance Limited- Gone Aug 06

Now its your turn to pick from:

1) Anglican Development Fund
2) Allied Nationwide. CEO John Mall came from St Laurence in 2007 Receivership 20 August 2010
3) AMP freezes $420m property fund August 08
4) Ashburton Finance (became part of SCF not sure when)
5) Asset Finance Ltd (withdrew from Deposit Guarantee Scheme in No 2009 - but still OK) Credit rating B negative
6) AXA freezes $117m in Property fund August 2008
7) Bastion Finance Ltd - closed January 2009 due to changing business conditions
8) Belgrave Finance Ltd - Gone May 08
9) Beneficial Finance Ltd - moratorium on repayments Oct 07
10) Boston Finance - recievership Nov 2009
11) Broadlands Finance (got S&P BB- in Feb 2010)
12) Business Finance
13) Capital and Merchant Finance - gone Nov 07
14) Chancery Finance - in more trouble August 07
15) Clegg and Co - gone Oct 07
16) City Wide Capital
17) Dominion Finance - in trouble June 08
18) Dorchester finance - prospectus withdrawn June 08
19) Equitable
20) Evia Finance
21) FAI Finance
22) Finance Direct
23) Fairfield Finance - gone August 2010 as part of SCF receivership
24) Fairview Finance (nee Cymbus) - gone May 08
25) FE Investments
26) Fisher and Paykel Finance
27) FMG - closed for business March 2009
28) Geneva Finance - selected to go buy Sector Surfa and QOH (well done!) - stopped taking deposits Oct 07
29) G2 Finance
30) General Finance
31) Guardian Trust - $249m Mortgage funds frozen July 2008
32) Gold Band Finance
33) Hanover Finance; $0.05b frozen July 08
34) IMP Diversified Income Fund 0 moratorium june 2008
35) Instant Finance - selected to go by georgeofthejungle and SectorSurfa
36) Kiwi Finance - gone April 08
37) Lombard Finance and Investments - gone April 08
38) Mascot Finance Gone March 09
39) Marac
40) Medical Securities
41) MFS Pacific - defaulted on loan repayments Feb 08 (now OPI Finance)
MFS Boston (parent MFS Finance) - stay in redemptions April 08
42) Mutual Credit Finance
43) Mutual Finance gone and drawing on ht eGovt Deposit Guarantee July 2010.
44) NZ Finance
45) North South Finance - in trouble June 08 (alnong with Dominion Finance)
46) Numeria Finance - gone Dec 07
48) OPI Finance - (nee MFS Pacific)
49) Orange Finance - ceased to offer new debentures August 08
50) Oxford Finance $3.1m deficit facing wall of maturities as at July 2010
51) PGG Wrightson Finance
52) Property Finance Securities voluntary liquidation May 2010
53) Presbyterian Savings
54) Priority Finance - just disappeared, don't know when.
55) Prometheus Finance
56) Public Trust
57) Rockforte - recievership April 2010
58) Riflemen - Selected by ShrewdCrude
59) Savings and Loans
60) St Kilda Finance; Calls it quits August 08
61) - St Laurence - In strife June 2008 iN Recievership April 2010
62) Southland Finance - suspect they've gone as their website links to SCF
63) South Canterbury Finance In Receivership 31 August 2010.
64) Spiers Finance - taken over by Allied Nationwide in 2008 - so they are now gone.
65) Strata Finance - default Apr 09
66) Strategic Finance - Selected to go by Possumthecat.$330m frozen August 08. Recievership March 2010
67) Technology holdings
68) UDC
69) United Finance - moratorium Jul 2008
70) Vision Securities - recievership April 2010

Addons:
71) BlueChip - selected by Stranger Danger - pretty much gone!
72) Money Managers - selected by Arbitrage. Sold up in 2008 - but like a phoenix its rising again as MMG

[Alan3285]

Just so we are clear a Ponzi scheme is a fraudulent scheme whereby investors are offered high returns and these returns are paid with money paid in by subsequent investors. The returns don't come form profits made.

Fraud is gaining money by deception for personal or other gain.

Affinity fraud is where a well respected, say, community, religious or business leader is used to prey on the vulnerable - such as the elderly, the unsophisticated and the greedy. The leader uses his influence to convince the investors his scheme is worth while.

Surely the vested interest that an underwriter has in placing an issue makes it as fraudulent to use the trust given by a client for personal gain as 'affinity fraud'.

I don't know, but it would be interesting to hear what a lawyer who specialises in that arena thinks.

Alan.

[Newman]

[QUOTE=Roger;318059]Yes if you're so lucky to be a Forsyth Barr cleint you would have been "sold" Feltex bonds, Feltex shares when they converted, Credit Sails, South Canterbury Finance Pref shares and so on. When I dealt with them I felt they OFTEN put their own interests ahead of their cleints and when there was an outstanding opportunity that came their way they used to have an in-house saying "TGFC" which is an acronym for "too good for clients" Be warned !!

Yes, my Forsyth Barr Managed Portfolio lost $15k on Feltex, $90k on 'Sails', $75k on SCFHA, etc. All stuff where there was a clear conflict of interest between profits for the manager or a sound investment for the client.

If you made a profit from the collapse of SCF it is time to move on for new opportunities. If you lost money on SCF it is time to learn a lesson, move on, and forget the nightmare. At any time there are opportunities in the market. You would miss the opportunities if you continue wasting your time complaining the failure of SCF. You would not win back a cent by endless complaining.

Spending your time in analysisng bonds like BLU020, ARW010, and STL030 and kaing some risks could be very rewardable in the future.

[Winston]

Newman, I agree that we have to move on (and I don't expect any help from N.Z.'s legal system) but pointing out what I have learned might help someone to understand how Private Portfolio Management works. Unless I am the last person in the country to realise just how corrupt it is. Some days it seems That I might be.

[minimoke]

Newman, I agree that we have to move on (and I don't expect any help from N.Z.'s legal system) but pointing out what I have learned might help someone to understand how Private Portfolio Management works. Unless I am the last person in the country to realise just how corrupt it is. Some days it seems That I might be.
Quite true Winston. People weren't learning lessons that were plain as day during the downfall of the different finance companies and certainly hadn't learnt by the time SCF fell.

I hope that people will look at the information that comes out from now on and use this as part of their education to become more sophisticated investors. I also have a naive hope that companies will be required to be more transparent and honest in their communications and reporting to investor and prospective investors. We need more "plain English" and an end to smoke and mirror reporting.

[Beagle]

[QUOTE=Winston;318072]

[QUOTE]If you made a profit from the collapse of SCF it is time to move on for new opportunities. If you lost money on SCF it is time to learn a lesson, move on, and forget the nightmare. At any time there are opportunities in the market. You would miss the opportunities if you continue wasting your time complaining the failure of SCF. You would not win back a cent by endless complaining.Spending your time in analysisng bonds like BLU020, ARW010, and STL030 and kaing some risks could be very rewardable in the future.[/QUOTE

Thanks for your sage advice, however its only the largest financial collapse in N.Z's history !!
If you're tired of the post mortem allready I'd say you're not much of a one for financial analysis and forensic accounting. I'm interested in who sues who, who gets charged with what and how the whole thing pans out for the Government amoung many other aspects. I think there's a legal case to be answered for negligence, trading whilst insolvent, deliberate mis-information and one or two other things, so from a regulatory, legal, criminal and civil proceedings perspective there's still plenty to dissect. For the record I have added PRC and NZOG to my holdings in recent days.

I've allready been down the bluestar track and lost a small amount. There are better opportunities out there in the above mentioned equities, in my opinion.