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Skelessi
07-09-2005, 12:30 PM
An interesting short article appears in the New Zealand Herald on 2nd September 2005 recording the rumour that up to half of SCF may be floated shortly. The NBR says it is "well in the pipeline" although Chairman Hubbard is not prepared to confirm the rumour. From the current financials and ratings it would probably be a roaring success and this investor would be a keen starter. Any comments?

Skelessi.

Snow Leopard
07-09-2005, 12:43 PM
if the rumour becomes fact, then I will look at it

Lizard
07-09-2005, 01:25 PM
The rumour has been out there for a while. I'd definitely be interested.

rmbbrave
07-09-2005, 01:29 PM
The last finance company that listed was NZF and we all know what happened then don't we?

rmbbrave
07-09-2005, 01:31 PM
Timaru businessman tipped to float finance company

02.09.05 1.00pm


Timaru businessman Allan Hubbard is rumoured to be readying his privately-held finance company for a sharemarket listing later this year.

The possible float would likely value the 80-year-old South Canterbury Finance (SCF) company at $200 million, making it one of the richest sharemarket offerings of the second half.

Mr Hubbard, 77, bought out his long term partner in the firm, Humphry Rolleston, in August last year. He is now reportedly planning to sell half of the finance company in a sharemarket float.

The National Business Review today quoted sources close to the deal as saying a partial sale was "well in the pipeline", adding that Mr Hubbard had recruited a small Timaru-based financial services firm to advise on the float.

Mr Hubbard played down the rumours, saying he had not made any decisions and would be in breach of the Securities Act if he said he was floating when he was not.

The low-profile Timaru businessman is one of the South Island's wealthiest men, with an estimated worth of $400 million. He has investments across a range of industries, but lives a humble existence, still driving about in an ancient VW Beetle.

SCF is due to issue its annual result for the year to June in the next few days. Last year the firm reported a full-year net after tax profit of $19.8 million.

In the 2004 year it had a loan book of more than $825m and operating income of $64.78m, making it the country's second biggest consumer finance company after bank-owned UDC.

Capitalist
07-09-2005, 01:43 PM
With the state of finance coys at the moment - yes- it is a great time to off-load it onto the sheeple :D:D:D

Someone's smart.

rmbbrave
07-09-2005, 01:52 PM
ASB Group Investments head Rob de Luca is not a fan of finance companies either.


ASB gives warning to small investors

07.09.05
By Georgina Bond


One of the country's largest fund managers has hit out at finance company deposits, saying they pose an unnecessary risk for small investors.

ASB Group Investments head Rob de Luca said New Zealanders had invested more than $8 billion with finance companies at rates of up to 10 per cent - believing their money was secured and their returns were safe.

"The reality is that neither of these things [is] true. Investors put their money with finance companies, seduced by the phrase 'first ranking secured deposits', but in many cases their money is anything but safe."

He said the money was frequently lent on to highly geared property developers or as high-risk personal loans to people unable to borrow from traditional sources.

Investors were not getting the appropriate compensation for the risk.

ASB Group Investments is New Zealand's third-largest fund manager, with more than $5.3 billion under management.

Although in competition with finance companies, "the reality is if one of these guys falls over it's bad for the whole investment sector, not just for them", a company spokesman said.

"We're more concerned that investors do the right thing and no one gets burned."

ASB's analysis of finance company reports showed many were earning weighted average interest margins of between 15 per cent and 40 per cent from their investments, but were paying investors' much lower rates, at between 9 per cent and 10 per cent in return.

"The ironic thing is if someone offered investors a return of 40 per cent they would automatically think the risks were too great.

"But investors aren't necessarily getting the return for that risk or maybe aren't aware of the risk they're actually taking," said De Luca.

Finance companies have had a dream run during the past few years on the back of a rising property market and periods of robust economic growth.

But concern has been mounting about what will happen if the economy and the property market hit the skids.

Yesterday, De Luca was urging caution:

"We've gone through a reasonably strong cycle in the investment space and property space, and we expect that to be a bit more subdued going forward ... we expect to see some issues," he said.

"We're saying to investors - be careful, speak to credit advisers when you look at an investment and really understand what you're investing in. Don't be fooled by the topline rate."

Finance companies came under the spotlight last September when the Securities Commission warned many were not keeping investors informed about the risks they faced - with some not meeting the minimum legal requirements.

That was based on an analysis of 30 companies' disclosure statements and was a precursor to a full report on the state of the industry.

The commission's report, released in April, said finance companies should improve their disclosure to investors.

Areas singled out for attention and improvement included: risk disclosure, principal risks, company activities, related party lending and the use of rating information and other disclosure issues.

A follow-up review of finance companies' disclosure statements this year will focus on documentation, with the commission looking to see if companies have improved their practices.

Snapper
07-09-2005, 02:05 PM
South Canterbury Finance would have to be one of the better finance companies around in terms of security and rates offered to debenture holders. As far as their profitability goes, I'm not sure but if its year has been on a par with Marac's then it should be pretty good. As with anything, though, it all depends on the price they want for it. My guess is that they would have to price it at a PE of 12 to 14 or under to make it an attrctive offer.

Skelessi
07-09-2005, 03:47 PM
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.

Lawso
07-09-2005, 03:53 PM
quote: rmbbrave posted:
The last finance company that listed was NZF and we all know what happened then don't we?
What about Dominion Finance, recently listed? I don't hold it but it strikes me as a quiet and solid achiever. Currently 124cps and paying 10+c div. Comparable in quality with SCF imo.

Capitalist
07-09-2005, 03:55 PM
Who do you work for? Goodness gracious me. Ask anyone in the Banker's Assoc about finance coys. The fact that ASB has gone public means it is a LOT worse than it looks, and it has been building up for years.

Push your barrow somewhere else dude [}:)].

PS Not you Lawso.

Skelessi
07-09-2005, 04:07 PM
I don't work - for anyone. I simply invest - very sucessfully so far!!

Capitalist
07-09-2005, 04:35 PM
OK...I mentioned this issue on the FBU thread a month or so ago and was abused so am a bit sensitive about it [:I]

But it has been made public at last.

07-09-2005, 05:10 PM
Capitalist and others banks and fund managers have a vested interest in keeping you out of finance company debentures. They want you to invest in managed funds thet gross you less than 2% and if they did not have competition from finance companies what would the banks offer you in interest maybe 0.2% to make their managed funds look good. And they would probally increase mortgage and loan rates by at least 2% due to lack of anywhere else to obtain loan money.

stormrose
07-09-2005, 06:20 PM
Indicators don't look so great for the NBFIs. They need capital to ride out a downturn - and many are too highly geared to do this.
Even though SCF may have the size a general downturn in the FinServ sector will cause capital flight to something else.
Wait for the crash, buy when the survivors are recovering.

Snapper
07-09-2005, 07:17 PM
quote:Originally posted by stormrose

Indicators don't look so great for the NBFIs. They need capital to ride out a downturn - and many are too highly geared to do this.
Even though SCF may have the size a general downturn in the FinServ sector will cause capital flight to something else.
Wait for the crash, buy when the survivors are recovering.


Agree with that and if there are defaults in the industry then it will probably hurt SCF as far as inflows go. Longer term however it will ensure that the sector is better regulated which will only help a company like SCF. Because of its capital base it could well be in a good position to pick up the pieces from other finance companies which are higher geared.

07-09-2005, 08:34 PM
Snapper What is so good about South Canterbury Finance last time I read their prospectous which is about $ years ago. I would not look at their secured
debentures. Please tell me what has changed since then.

Snapper
07-09-2005, 08:53 PM
Longstanding finance company - been around for ever
Been through all parts of the business cycle
Well capitalised
Stable management
Good reputation
Well supported by advisor groups.

No denying, however, that it doesn't offer the same security as the major banks but it would have to be one of the strongest in the non-bank sector.

pimpit
08-09-2005, 07:47 AM
If you are after good interest rates put your share of money that u want to put into fixed interest in to a reputed overseas bank. This way you get good interest on the money as you dont pay tax on interest.

08-09-2005, 08:02 AM
Snapper Whats New that was what was said four years ago but prospectous detailed some of the things it was lending on and this raised alarm bells with me so what exactly is new. Your statement would cover over 90% of finance companies. Can you come up with any concrete changes or other reasons why this is a finance company to invest in or with.

lambton
08-09-2005, 08:08 AM
quote:Originally posted by pimpit

If you are after good interest rates put your share of money that u want to put into fixed interest in to a reputed overseas bank. This way you get good interest on the money as you dont pay tax on interest.


if you're a NZ tax resident you must pay tax on your worldwide income. Not declaring would be evasion. Are you referring to the attraction of cashflow timing?

rmbbrave
08-09-2005, 08:59 AM
Support for your view Enigma

"Capitalist and others banks and fund managers have a vested interest in keeping you out of finance company debentures. They want you to invest in managed funds thet gross you less than 2% and if they did not have competition from finance companies what would the banks offer you in interest maybe 0.2% to make their managed funds look good. And they would probally increase mortgage and loan rates by at least 2% due to lack of anywhere else to obtain loan money."


ASB remarks just sour grapes, say finance companies

08.09.05
By Georgina Bond


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."

Finance companies committed to paying a certain rate of return, whereas investors did not have that commitment from fund managers.

On Tuesday, ASB Group Investments head Rob de Luca said investors put their money with finance companies seduced by the phrase "first ranking secured deposits" but, in many cases, their money was anything but safe.

After analysing the financial reports of its competitor finance companies - guardians of more than $8 billion of hard-earned cash - ASB said many were earning weighted average interest margins of between 15 to 40 per cent, but were paying investors well below that at between 9 to 10 per cent.

De Luca said a lot of that money was lent out to highly geared property developers and those returns were not appropriate returns for that risk.

Although finance companies have had a dream run in recent years on the back of a rising property market, De Luca expected returns on the property market and investment in general to be more subdued going forward. This meant investors were not getting the security they would expect. Many finance companies felt ASB was painting the industry with too broad a brush.

St Laurence Group managing director Kevin Podmore agreed investors were not getting appropriate returns for their risk in some instances.

"But not everyone is charging 40 per cent interest rates."

He suggested an independent rating process was needed to help investors gauge the level or return against the risk.

Western Bay Finance chairman Jim Smylie said banks created a great opportunity for finance companies 10 years ago when they "wouldn't help the average man in the street".

"Now they've realised what they have missed out on and are fighting for market share and trying to get back into the market we're in."

While it was valid to urge investors to be cautious about where they put their money, it was up to the market to decide whether the returns on their risk was appropriate.

Smylie did not think there was cause for alarm about an industry meltdown if the property cycle took a turn for the worse.

"I think there's going to be a correction and I think some finance companies will find it difficult but they will just be absorbed by bigger players like ourselves."

North South Finance managing director Darryl Eastgate was surprised at ASB's criticism.

"North South has an $8 million overdraft from ASB, so the bank's security ranks pari passu with our investors."

ASB Group Investments is New Zealand's third-largest fund manager with more than $5.3 billion under management.

Asked if the statement by its investment arm was as strong as the bank anticipated, ASB head of corporate affairs Linley Wood said the aim was to urge caution and to remind investors of the me

rmbbrave
08-09-2005, 09:11 AM
Elders Finance reports profit jump

08.09.05 6.40am


Commercial finance company Elders Finance has reported a 61 per cent leap in its annual net profit to $35.4 million, compared with $22 million last year.

Mark Hotchin, executive chairman of its parent company, Hanover Group, said the"stellar performance" reflected strong operating revenue growth and tight control of operating expenses.

Operating revenue passed the $100 million mark for the first time at $109 million, up from $80.9 million last year.

Skelessi
08-09-2005, 02:39 PM
We have strayed a little from the topic, which is [u]not</u> whether to place money on secured (or any other) debenture through a finance company, [u]but</u> whether or not to buy shares in SCF should it list !!

08-09-2005, 03:31 PM
Skelessi then give us some reason why we should invest in this companies shares.I for one, unless you can convince me something has dramatically changed in last 4years, would not touch this with a barge pole. Please Give me some pertinent facts. The rating companies seem in my opinion have a very biased view of finance companies. Some they rate highly on my reading of their prospectouses would be some of the most dangerous to invest in and vice versa.

Skelessi
10-09-2005, 08:34 AM
Enigmna, sorry I didn't get back to you earlier, but I have been out of town. To answer your question, I think the attributes of SCF as a potential investment are very sucinctly summed up by Chris Lee who is a pre-eminent and well researched sharebroker on the Kapiti Coast. I trust he will not mind me quoting him. He says:

ďThe best of the finance companies in New Zealand, without much argument from any analysts or commentators, are UDC Finance and South Canterbury Finance.

They share a genuinely long heritage, they have substantial capital, they lend at rates comparable with the trading banks, they are profitable, and they have knowledgeable management and directors.
The best of the finance companies in New Zealand, without much argument from any analysts or commentators, are UDC Finance and South Canterbury Finance.

They share a genuinely long heritage, they have substantial capital, they lend at rates comparable with the trading banks, they are profitable, and they have knowledgeable management and directors.
SCF lends across all the sectors, its bad debt level is low, its margins fair, and thus from its billion dollar of assets, it produces a tax-paid profit of around $25 million, a 2.5% margin. By comparison, Provincial Finance last year produced the same sort of profit from a $250 million book, suggesting an effective tax-paid margin of 10.0%.

SCF's best known figure is Allan Hubbard, a legend in the town, driving a very old, olive green VW Beetle, spurning toys like cell phones, reaching his office each day before dawn, and reading all the mail, the better to stay informed.

He still signs every debenture certificate and there are 700 issued each week.

But SCF also has competent staff, headed by CEO, Lachie McLeod, once a Super 12 referee and once Westpac's South Island head of rural lending, and it has other very experienced, down-to-earth directors and management.

McLeod is a quiet, fit young man (40s, I guess) who heads a structure that has several wholly-owned companies in cities like Palmerston North, Dunedin, Auckland and Hamilton, each named by their geographic base.

The company's funding manager is Kevin Gloag, probably the most experienced and respected funding manager in the industry, himself once a Highlanders rugby coach.

South Canterbury Finance prides itself as having no frills, just a successful business, built on competent, normal people, confidently performing their duties knowing that if the company ever needed more capital, either Allan Hubbard would write a cheque, or any number of institutions would take up a share opportunity.

As its owner is 77, there must be a fair chance that some of the company will be floated, perhaps this year.

If that occurs, the queue for shares will stretch way past Ashburton and Oamaru, and I will be part of it. ď

Chris Lee has done extensive research into the finance company sector and his weekly articles (not always complimentary) may be read on his website at &lt;www.chrislee.co.nz&gt; They are usually most informative and interesting.

rmbbrave
10-09-2005, 09:29 AM
Long Strangle,

What do you think of South Canterbury Finance?

10-09-2005, 11:28 AM
Skelessi Thanks for efforts so far.But have you read their prospetous not their investment statement. Who do they lend to is it a broad spectrum or a very narrow focus,and what are the percentage limits to any one sector. The last time I bothered to look at one of their prospectuses the very narrow focus they concentrated on (I am not saying they are not successful) for lending made it a very high risk company in my opinion if there was a down turn in that sector. Very like a certain finance company (with no connection to South Canturbury Finance just used as an example)that has a huge exposure to VTL and it's clients.

Skelessi
10-09-2005, 11:42 AM
There is no prospectus yet. The discussion arose out of an article in the New Zealand Herald (see posting by rmbrave on 07/09/2005 for verbatim copy) suggesting that the company might list before the end of the year. I can only suggest that with it's position in the market and track record a float would be overwhelmingly successful. If you do not like finance companies (which appears evident from your comments) then, if it should list, stay away. I won't.

10-09-2005, 09:03 PM
Skelessi I have money invested in five finance companies in their first ranking debentures and the odd capital note. To the tune of about $60000.00 Their prospectous for borrowings should be available by making a phone call asking about lending them money they usually have an add in NZ Herald. Tell them you want the prospectous not the investment statement which is what they send most people. But you have a full legal right to ask for the full prospectous. This might give you a better insight into the company. As I said about four years ago it made me run a mile. And it is not easy to obtain a current one from Australia.

Gofish.
12-09-2005, 08:11 PM
I think Skelessi & Chris Lee are spot on.
If SCF do float, the South Island will back them, as well as many in the industry. Not me, I prefer a bit more risk/reward at present.
It won't be given away, and it won't be a dog.
Just a boring conservative well run company.
And yes, Allan Hubbard does make mistakes, Broadway & Scales have made a few.

Snow Leopard
03-11-2005, 05:45 AM
clips: existing thread to read
regards

rmbbrave
03-11-2005, 10:22 AM
Finance float sails forward quietly

03.11.05
By Richard Inder


Allan Hubbardís South Canterbury Finance is gearing up for a sharemarket float - a move that is likely to see the intensely private Timaru-based businessman pocket as much as $210 million.

South Canterbury, which has a loan book of around $1.02 billion, making it the third-largest finance company after UDC and Marac, is silent about the listing likely to occur in the lead up to Christmas.

However, in a short statement yesterday, it said Hubbard would sell up to 75 per cent of the company, which is worth as much as $280 million, according to an analysis of company earnings. Forsyth Barr would be the floatís lead manager.

South Canterbury said: "Further details regarding the listing will be provided once the prospectus has been registered."

The float is an apparent about-face for the company. Hubbard told the Business Herald last month: "They [the media] are always talking about floating South Canterbury Finance.."

Hubbard, over 70 and chairman of the firm, is thought to be selling so he can ease back on his workload.

The company faces a tough road to market.

It will be vying for investorsĀEattention in competition with Graeme Hartís transtasman food business Goodman Fielder, which is seeking about A$1.6 billion before Christmas.

It is floating at a time when higher interest rates and the high dollar are putting the brakes on the economy.

Finance companies have also been criticised for poor disclosure and for their exposure to sectors prone to the downturn such as consumer lending and property.

However, South Canterbury, established in 1926, is one of the stronger companies in the sector. It has a diversified loan book spread across a diverse range of sectors.

Its earnings have shown steady growth. In the year to June, net profits rose from $20.7 million to $26.5 million and sales rose from $106.7 million to $131.6 million. In the year to June 2003, net profits of $15.8 million were made on $89.1 million of sales.

One analyst said: "Itís been around a long time. I rate them highly."

Hubbard said of the latest results: "Over the next 12 months, South Canterbury Finance looks forward to conservative growth through planned development and further diversification of its lending exposure across a broad range of industries."

South Canterbury is the holding company for several finance subsidiaries across the country, including Auckland Finance, Waikato Finance and Palmerston North Finance in the North Island and the Southland and Otago Finance in the South.

It also trades on Hubbardís reputation for parsimony and conservatism.

Although Hubbard is one of the South Islandís wealthiest men, he lives a humble life, working from 6.30 in the morning until 10.30 at night and still drives a 37-year-old VW Beetle.

- additional reporting Andrea Fox

lambton
03-11-2005, 01:35 PM
quote:Originally posted by Gofish.

I think Skelessi & Chris Lee are spot on.
If SCF do float, the South Island will back them, as well as many in the industry. Not me, I prefer a bit more risk/reward at present.
It won't be given away, and it won't be a dog.
Just a boring conservative well run company.
And yes, Allan Hubbard does make mistakes, Broadway & Scales have made a few.




Whilst I agree SCF will be a fairly safe bet but not cheap entry to the sector I wouldn't make my decision based on Mr Lee's errudite comments. Had a look at his site "geez is all I can say

Halebop
03-11-2005, 03:00 PM
quote:Originally posted by lambton

Whilst I agree SCF will be a fairly safe bet but not cheap entry to the sector I wouldn't make my decision based on Mr Lee's errudite comments. Had a look at his site "geez is all I can say


I had a look at his site too. No nonsense like his comments. Some minor navigation / usability issues but nothing as frustrating as those many expensive web developments that only work for those using Internet Explorer.

On South Canterbury Finance: The company is a much higher quality lender than many of its so called peers. If Mr Hubbard wants to sell at the top of the market so be it - I suspect the mooted transaction will have more to do with tidy estate planning than extracting the last dollar.

Gofish.
03-11-2005, 03:19 PM
I imagine Alan Hubbard also had to find some money somewhere to pay out Humphrey Rolleston.
Maybe buy a new VW with the change?

Major von Tempsky
03-11-2005, 04:26 PM
I have some sympathy for all the points of view expressed.
Why can't I escape the sneaking unworthy suspicion that de Luca, as a Funds Manager, would like to rain on all finance company parades to try and drive more investment into the dreadful managed funds area which achieves a rotten rate of return below the market indices and hits investors with fees left right and centre.....
I read recently that the funds industry is continuing to lose funds massively, some sort of cash outflow of about $800 mill in the last year as investors wise up on how bad they are. Probably another reason for TEL going down (as well as the overseas investors taking their exchange profits), the funds industry has to sell TEL at any price to pay out withdrawers.
Yes, Dominion Finance comes to mind as the most recent and successful float.
On the other hand Warren Buffett enjoins us to avoid floats as its a means of milking suckers as Capitalist notes. But there are the occasional exceptions Cap Props, TEL, CEN....
But who is the organising broker? Unless you have an a/c there you can kiss goodbye to the prospect of getting a meaningful parcel.
It all depends whether Hubbard leaves some profit in for the punters or does another Mike Pero....

icehot
03-11-2005, 05:33 PM
quote:Originally posted by Skelessi

Enigmna, sorry I didn't get back to you earlier, but I have been out of town. To answer your question, I think the attributes of SCF as a potential investment are very sucinctly summed up by Chris Lee who is a pre-eminent and well researched sharebroker on the Kapiti Coast. I trust he will not mind me quoting him. He says:

ďThe best of the finance companies in New Zealand, without much argument from any analysts or commentators, are UDC Finance and South Canterbury Finance.

They share a genuinely long heritage, they have substantial capital, they lend at rates comparable with the trading banks, they are profitable, and they have knowledgeable management and directors.
The best of the finance companies in New Zealand, without much argument from any analysts or commentators, are UDC Finance and South Canterbury Finance.

They share a genuinely long heritage, they have substantial capital, they lend at rates comparable with the trading banks, they are profitable, and they have knowledgeable management and directors.
SCF lends across all the sectors, its bad debt level is low, its margins fair, and thus from its billion dollar of assets, it produces a tax-paid profit of around $25 million, a 2.5% margin. By comparison, Provincial Finance last year produced the same sort of profit from a $250 million book, suggesting an effective tax-paid margin of 10.0%.

SCF's best known figure is Allan Hubbard, a legend in the town, driving a very old, olive green VW Beetle, spurning toys like cell phones, reaching his office each day before dawn, and reading all the mail, the better to stay informed.

He still signs every debenture certificate and there are 700 issued each week.

But SCF also has competent staff, headed by CEO, Lachie McLeod, once a Super 12 referee and once Westpac's South Island head of rural lending, and it has other very experienced, down-to-earth directors and management.

McLeod is a quiet, fit young man (40s, I guess) who heads a structure that has several wholly-owned companies in cities like Palmerston North, Dunedin, Auckland and Hamilton, each named by their geographic base.

The company's funding manager is Kevin Gloag, probably the most experienced and respected funding manager in the industry, himself once a Highlanders rugby coach.

South Canterbury Finance prides itself as having no frills, just a successful business, built on competent, normal people, confidently performing their duties knowing that if the company ever needed more capital, either Allan Hubbard would write a cheque, or any number of institutions would take up a share opportunity.

As its owner is 77, there must be a fair chance that some of the company will be floated, perhaps this year.

If that occurs, the queue for shares will stretch way past Ashburton and Oamaru, and I will be part of it. ď

Chris Lee has done extensive research into the finance company sector and his weekly articles (not always complimentary) may be read on his website at &lt;www.chrislee.co.nz&gt; They are usually most informative and interesting.



Chris Lee? Didn't he recommend against Sky TV and OMIP in a newsletter but recommended Kiwi Income Development Trust and AMP Office Trust in same newsletter? Sky TV and OMIP are both well up (several hundred %) but Kiwi and AMP investors lost money.

South Canterbury Finance to be done by Forsyth Barr - remember Feltex?

Skelessi
03-11-2005, 06:53 PM
So [u]much</u> conjecture and so [u]little</u> information!! The only certain thing is that the rumour mill [u]was</u> right. I do not think SCF will be floated badly. In my estimation, the current owner of the company is too astute for that and will want to see the company continue to grow and prosper. I will await the prospectus with interest and make up my mind from that.

rmbbrave
16-11-2005, 05:25 PM
South Canterbury Finance to list

02.11.05 3.50pm
Privately held South Canterbury Finance, one of the country's biggest finance companies, today confirmed it is gearing up for a sharemarket listing.

The 80-year-old firm is controlled by Timaru businessman Allan Hubbard.

Mr Hubbard, 77, last year bought out his long term partner, Humphry Rolleston. Now he plans to sell up to 75 per cent of his holding - which is held under the name Southbury Group Ltd.

Forsyth Barr has been appointed as lead manager, while Timaru-based financial services minnow Munro Hubbard Ltd will co-manage the float.

Today's news confirms a two-month rumour.

No further details were released, but sources close to the deal have previously said the float was likely to value the company at $200 million, making it one of the richest sharemarket offerings in the second half.

The low-profile Mr Hubbard is one of the South Island's wealthiest men, with an estimated worth of $400 million. He has investments across a range of industries, but lives a humble existence, still driving about in an ancient VW Beetle.

South Canterbury Finance last month posted a record after tax profit of $26.5 million for the year to June.

Profits before tax rose $5.8 million to a record $30.2 million, up nearly 24 per cent on the previous year.

Total assets topped $1 billion for the first time in its 80-year history, making it the country's second biggest consumer finance company after bank-owned UDC.

- NZPA

moe
21-11-2005, 04:44 PM
Bit of a disapointment today, South Canterbury Finance has anounced that it is not going to be listed.

winner69
11-07-2009, 02:37 PM
Maybe just as well as it didn't list .... initial rsponse would have been a soaring shareprice but may have ended up in tears

If what gaynor says today http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10583721 is an indication of what is going on i am glad i have gotten any cash in them ....

All those related party loans is ominious (70% of all loans) and my initial reaction of this outfit recently buying farms from related parties was a shiver down my spine ..... like were these farms bought at the height of the market etc.

The web of companies involved with SCF is a lot broader than i had imagined (never really studied it anyway) .... like 75% ownership of Kelt Capital (Sam Kelts drunken antics over the years are well publicised and sponsership of $2m horse races and provincial rugby teams always seem to be ego trips), Helicopter Line and strange names like Plum Duff Ltd

All good stuff that Hubbard is handing out personal guarantees and says he will satnd behind the company ...... but investors have put a lot of faith in one man

winner69
11-07-2009, 02:41 PM
One of those loans is a $15m one to Dunvegan Seadown .... a $1,000 company controlled by the CEO

whatsup
11-07-2009, 02:54 PM
Oh imho what a mess, remember that the 250 year old Bank of Scotland went bust in 18 months with "flash Harry "type management.
You cannot f@rt against thunder!!!

winner69
11-07-2009, 03:03 PM
These must be a good buy at a 40 cents

SCF 09.42% Perpetual Preference Shares (SCFHA)

Colin .... interested

Contrarian
11-07-2009, 03:06 PM
Gidday
Brian Gaynor has it wrong, They are 40 cents per share, They pay a "dividend" that is fixed & reset every year.

Capitalist
11-07-2009, 03:12 PM
Winner I remember you and I both said some years ago that no finance coy was big enough not to fail, including SCF and Hanover.

Well Hanover has gone and SCF is not looking good with all these dairy conversion related party loans.

Would not like to be a shareholder.

Dr_Who
11-07-2009, 03:16 PM
I agree with Winner and Cap.

winner69
11-07-2009, 03:20 PM
Gidday
Brian Gaynor has it wrong, They are 40 cents per share, They pay a "dividend" that is fixed & reset every year.

Correct Contrarian a 'share' .... 40 cents odd for a 9.25 cents 'dividend' (this years rate) for a rock solid finance company not too bad

NZDX bit clumsy with their quotes .... reading it quickly suggests a yield

Misc
11-07-2009, 03:33 PM
Gaynor has it mostly right , but the 40% Pref yield is poorly researched nonsense. The 'prefs' were sold at $1 each raising $120m a couple years ago. Ouch now 40c offered! That does partly reflect a reduced yield (they pay 2.3% above bill rate from memory) but is mainly shareholder panic , buyers are few.

Anyone touting Hubbard as a saviour (incl S&P) is seriously deluded. Hubbards main 'wealth' is in his holding of Southbury Ltd shares , and if SCF collapses , so does Southbury , and so does Hubbard , no matter how honourable he may be.

My pick is SCF will try to merge with Southbury and raise capital in the merged entity , there will certainly be a downgrade to 'junk bonds' and I cant think of any potential suitor who would perhaps inject the $250m or so required , unless perhaps the Govt or a seriously discounted sharemarket listing?

Wonder how Lachie Mcleod is feeling with a $15 loan from SCF secured by Southbury shares that are likely worth only 50% of their value now?? A rather large incentive to perhaps be a tad 'economical' with the truth as CEO?

This could get real ugly , imo.

Misc

Dr_Who
11-07-2009, 03:52 PM
Is SCF govt guaranteed?

winner69
11-07-2009, 03:56 PM
Is SCF govt guaranteed?

Yes ... it does have a Govt quarantee

Misc
11-07-2009, 04:03 PM
Possibly .. well until Oct 2010? So the Govt wont want it 'falling over' however there must now be doubts about disclosure when the Govt accepted SCF into the gaurantee scheme late last year as it would appear from the a/c's to 30th June 09 that impairments have been significant for most of the financial year. This may give the Govt 'wriggle room' however I would expect the Govt to perhaps at least underwrite a discounted sharemarket listing or similar to try and make the problem go away?
It all comes down to how badly the loan book is impaired , and when a reasonable person would have considered provisioning appropriate , imo.

M

winner69
11-07-2009, 04:21 PM
There does seem to be a certain amount of arrogance in this fellow Lachie

McLeod dismissed concerns over these arrangements as "great bloody gossip from The Viaduct".

and

"Some of our related-party lending is the best lending we know," he said.

and

And everything we do, we talk very closely with our auditors [Timaru-based accounting firm Woodnorth Myers], our trustee [Trustees Executors] and of course now we've got a new partner called Treasury [monitoring the Deposit Guarantee Scheme]."


from
http://www.nzx.com/news/markets/4940697

winner69
11-07-2009, 04:30 PM
What does the Government guarantee actually guurantee ..... everything owing to creditors or just certain things

Misc
11-07-2009, 05:05 PM
Depositors funds only ... that does not incl offshore depositors or pref shares...imo

Grimy
11-07-2009, 06:18 PM
What does the Government guarantee actually guurantee ..... everything owing to creditors or just certain things

http://www.treasury.govt.nz/economy/guarantee This link may be useful.

Steve
11-07-2009, 06:48 PM
I wonder if there are any additional exposure problems now that PGW have issued a profit downgrade...

Misc
11-07-2009, 08:01 PM
Here you go ..... PGW , Southbury and SCF merge creating a mega Ag/Finance Group (not dissimilar to Wrightson before they sold their Finance division to Rabo) with the Crown as 19.9% shareholder .... with non-performing property loans 'quarantined' in an 'Adbro' style Co owned by the Crown and Hubbard?

M

Dr_Who
12-07-2009, 04:21 PM
Here you go ..... PGW , Southbury and SCF merge creating a mega Ag/Finance Group (not dissimilar to Wrightson before they sold their Finance division to Rabo) with the Crown as 19.9% shareholder .... with non-performing property loans 'quarantined' in an 'Adbro' style Co owned by the Crown and Hubbard?

M

IT doesnt matter what kind of mud you put in a pot or how you stir it, it is still mud. I assume if SCF goes it will drag down PGW also?

macduffy
12-07-2009, 05:01 PM
IT doesnt matter what kind of mud you put in a pot or how you stir it, it is still mud. I assume if SCF goes it will drag down PGW also?

If Brian Gaynor's statement that SCF had $322m cash or cash equivalents as at 31 December, 2008 is correct it might be a bit soon to write this company off.
Hubbard's willingness, and ability, to inject $40m new capital, effectively to meet the pre-tax loss, speaks volumes, IMO, unlike the situation with so many of our failed finance companies.

Disc: Not holding SCF debentures etc or PGW.

Steve
12-07-2009, 05:20 PM
I recall DPC emphasising their 'cash & equivalents' as their cashflow dried up...

Misc
12-07-2009, 07:44 PM
The cash they hold is about 10% of the loan book ... will not cover much ,,, as Hanover et al found out ...thisis they way finance Co's work .... which is why almost all have failed.

Snoopy
12-07-2009, 08:42 PM
IT doesnt matter what kind of mud you put in a pot or how you stir it, it is still mud. I assume if SCF goes it will drag down PGW also?


My memory of the situation is that Pyne Gould Wrightsons (PGW) and South Canterbury Finance had no direct connection at all. None that is, until South Canterbury Finance bankrolled a cash settlement payout that PGW had to make to Silver Fern Farms. That payment was for damages as a result of the PGW initiated failed merger between Silver Fern Farms and PGW. At some stage PGW must pay this debt back to South Canterbury Finance. Failing that, South Canterbury Finance has the right to purchase new PGW shares (at $1.50) in lieu of being repaid. However with PGW shares trading at well below that figure, it wouldn't make any sense for South Canterbury Finance to exercise that option. That $1.50 'call option' for 16.666m PGW shares is worthless at anywhere near the current PGW market capitalisation.

My conclusion then, is that if South Canterbury Finance does go down, then that event will have no effect at all on PGW. Provided that is the PGW share price stayed below $1.50. If the PGW share price went above $1.50, then any receivers in a hypothetical receivership of South Canterbury Finance would exercise the call option to recover some assets by 'on selling' those new PGW shares. But as long as the PGW share price remains below $1.50 those receivers would have nothing to sell. The net effect on PGW on any failure of South Canterbury Finance is therefore likely to be nil. Except of course as an opportunity for the PGW finance arm to pick up some new business, as a result of the failure of a competitor.

I am sure someone will correct me if I am wrong.

SNOOPY

discl: hold PGW

Steve
12-07-2009, 08:55 PM
Snoopy, I was musing on the implications for SCF if PGW couldn't repay the loan and the shareprice remained lower than $1.50.

Misc
12-07-2009, 09:40 PM
More likely Lachie Mcleod and Kelt Finance cant repay .... there is at leat $41m of the $58m 'impaired' loans before you start looking at Fiji and other substantial exposures in the development sector ... imo. The PGW deal looks like a corporate gig , hence my speculation that the 3 may merge , with support from the Crown.

Misc

winner69
13-07-2009, 05:17 AM
More likely Lachie Mcleod and Kelt Finance cant repay .... there is at leat $41m of the $58m 'impaired' loans before you start looking at Fiji and other substantial exposures in the development sector ... imo. The PGW deal looks like a corporate gig , hence my speculation that the 3 may merge , with support from the Crown.

Misc

SCF have siad on many occassions they are almost like a regional development fund anyway .... so govt 'assistance' in formalising such a thing could be on the cards .... somethng that the likes of Jim Anderton would be all for

Toddy
13-07-2009, 09:53 AM
I thought that SCF success was built on farm lending. Did they get caught up in all of the Queenstown property hype.

winner69
13-07-2009, 10:24 AM
I thought that SCF success was built on farm lending. Did they get caught up in all of the Queenstown property hype.

For whats it worth industry exposures are -

13% Agriculture, Forestry, Fishing & Mining
4% Manufacturing
3% Construction
7% Wholesale & Retail Trade
6% Hotels, Motels & Restaurants
18% Transport, Storage & Communication
5% Finance & Insurance
37% Property & Business Services
8% Personal Services & Housing

Make what you want out of that ..... tksnen form numbers in their Investment Statement

Misc seems to have a fair idea of whats going on ..... maybe misc can elaborate

Toddy
13-07-2009, 12:05 PM
For whats it worth industry exposures are -

13% Agriculture, Forestry, Fishing & Mining
4% Manufacturing
3% Construction
7% Wholesale & Retail Trade
6% Hotels, Motels & Restaurants
18% Transport, Storage & Communication
5% Finance & Insurance
37% Property & Business Services
8% Personal Services & Housing

Make what you want out of that ..... tksnen form numbers in their Investment Statement

Misc seems to have a fair idea of whats going on ..... maybe misc can elaborate

Maybe we can simplify things.

Farming 13%
Property 70%ish (construction/hotels/motels/storage/property/housing)
Finance (car loans?) or is that under transport?

Yes, a very interesting breakdown.

whatsup
13-07-2009, 12:22 PM
SCF Pep Fref Shares down again today approx 6% not looking too great!!

winner69
13-07-2009, 12:23 PM
Looking back a year or so it is the property related sectors that have increased quite markedly

Transport prob a lot to do with the helicoptors?

Snapper
13-07-2009, 12:27 PM
I can't imagine govt being too happy about the prospect of SCF going down and invoking the guarantee. This could end up similar to the US bank bailout. In a NZ context is SCF too big to fail? I would say yes; it would be the death knell for the non-bank sector and unless the banks are going to fill that financing space it could knock any property recovery for six.

winner69
13-07-2009, 12:57 PM
I can't imagine govt being too happy about the prospect of SCF going down and invoking the guarantee. This could end up similar to the US bank bailout. In a NZ context is SCF too big to fail? I would say yes; it would be the death knell for the non-bank sector and unless the banks are going to fill that financing space it could knock any property recovery for six.

Jeez .... talking about SCF being too big to fail ...... this country is really stuffed if this is the case

Unlikely anyway because Allan says he will front up with any losses

whatsup
13-07-2009, 01:33 PM
When you go through the SCF "book" just how many of those "industries " would you "invest" in if the seperate parts of that "book" were floated on the share market?

Misc
13-07-2009, 03:10 PM
Good point 'WhatsUp' . SCF have the same systemic issues that caused the likes of Hanover to collapse. Even worse now they have borrowed hundreds of millions from investors at high rates which they cannot lend out due to the lack of secure investment opportunities at high rates. Therefore they are bleeding cash in all directions.
The 2012 bonds being traded at 17.50% today and the prefs at 37.5c tell you that many investors think the chance of survival is not great.
And who would disagree with the company refusing to come clean about the real losses in the loan book.

Misc

Balance
13-07-2009, 04:21 PM
Jeez .... talking about SCF being too big to fail ...... this country is really stuffed if this is the case

Unlikely anyway because Allan says he will front up with any losses

Relax. Kiwibank will take over SCF and become a bigger NZ bank. Depositors will be protected.

Person to lose is Hubbard but that's how it works, isn't it? You make the wrong decisions, grow too fast and lend to the wrong borrowers.

The finance companies were promoting unproductive property speculation to the detriment of the productive sector anyway. Why would them being out of the scene be a bad thing?

whatsup
13-07-2009, 04:25 PM
Bal...., Why would the Govt Bank risk its shareholders $ers in buying a co that IMHO could realistly realise .40-.60 in the $ in a fire sale?

Balance
13-07-2009, 05:24 PM
Bal...., Why would the Govt Bank risk its shareholders $ers in buying a co that IMHO could realistly realise .40-.60 in the $ in a fire sale?

Because this financially illiterate government has already guaranteed the debt of SCF to Nov 2010.

Plus, do you really think John Key and Bill English know what they are doing? They guaranteed the debts of just about all finance companies standing, including Mascot!

macduffy
13-07-2009, 05:39 PM
Because this financially illiterate government has already guaranteed the debt of SCF to Nov 2010.

Plus, do you really think John Key and Bill English know what they are doing? They guaranteed the debts of just about all finance companies standing, including Mascot!

Now, isn't that a bit unfair, Balance?

Cast our minds back. The Australian and New Zealand govts were guaranteeing bank deposits to ensure that the system didn't collapse through a loss of confidence. Not to extend that guarantee to finance companies would have meant the certain end to their ability to raise funds and fini for the lot of them, and their depositors.
Of course, there are still big problems to work out between now and the end of October, 2010. or to extend the guarantee.

;)

Balance
13-07-2009, 05:49 PM
Now, isn't that a bit unfair, Balance?

Cast our minds back. The Australian and New Zealand govts were guaranteeing bank deposits to ensure that the system didn't collapse through a loss of confidence. Not to extend that guarantee to finance companies would have meant the certain end to their ability to raise funds and fini for the lot of them, and their depositors.
Of course, there are still big problems to work out between now and the end of October, 2010. or to extend the guarantee.

;)

Australian guarantee does not extend to their finance companies. Only to banks, building societies and credit unions directly supervised.

macduffy
13-07-2009, 06:43 PM
Australian guarantee does not extend to their finance companies. Only to banks, building societies and credit unions directly supervised.

That's right. But it's the NZ situation that we're concerned with here and failure to guarantee NZ finance companies would have seen a fatal drain of funds away from finance companies to the guaranteed banks.

By the way, I think it was Michael Cullen and Helen Clark in the hot seat at the time, not JK and BE.

;)

Steve
13-07-2009, 06:51 PM
By the way, I think it was Michael Cullen and Helen Clark in the hot seat at the time, not JK and BE.

That's correct, it was before the election and JK was miffed that Helen did not 'consult' with him especially when she knew that Labour were going to be voted out...

Balance
13-07-2009, 08:14 PM
That's right. But it's the NZ situation that we're concerned with here and failure to guarantee NZ finance companies would have seen a fatal drain of funds away from finance companies to the guaranteed banks.

By the way, I think it was Michael Cullen and Helen Clark in the hot seat at the time, not JK and BE.

;)

You are right!

winner69
14-07-2009, 05:20 AM
SCF Pep Fref Shares down again today approx 6% not looking too great!!


Wonder if punters knew they were buying shares .... bet most thought they were buying bonds

Hells bell ... less than 40 cents ... but they will be redeemed at a $1 they say if all goes belly up

winner69
14-07-2009, 05:21 AM
Maybe we can simplify things.

Farming 13%
Property 70%ish (construction/hotels/motels/storage/property/housing)
Finance (car loans?) or is that under transport?

Yes, a very interesting breakdown.

Lachie quoted in a recent release that property only makes up 23% of advances ... so not all that bad

whatsup
14-07-2009, 08:35 AM
IMHO without Hudd---- to support SCF I think that there is a good chance that it would fail.

rainey
14-07-2009, 08:55 AM
What I cannot understand is how Hubb is financing his support. Is it by another third party transaction

Dr_Who
14-07-2009, 09:03 AM
Any related party lending like Bridgecorp and Hangover?

winner69
14-07-2009, 09:21 AM
SCF should be makinmg heaps ...... on their website 'Personal Loans from 14.5% pa'

..... with top depoist rates of 8.50% ..... for a 60 month secured debenture

rainey
14-07-2009, 09:41 AM
A browse of the companies registery website " also owns" indicates to me that SCF,s exposure to agriculture is far greater than they are admitting too

winner69
14-07-2009, 09:52 AM
A browse of the companies registery website " also owns" indicates to me that SCF,s exposure to agriculture is far greater than they are admitting too

Hubbard is a director of so many companies he must get writers cramp signing off the accounts each year .... wonder if he can keep track of them all

Misc
14-07-2009, 04:51 PM
Rainey , the exposure to the Ag sector is nothing compared to the Property Development sector. A quick search of 'Satuit Properties Ltd' on the Companies site will tell a story ... and undisclosed story at that ... bit like Fiji ...and so many more if you care to do some research!
Has anyone asked how CEO Lachie Mcleod is managing to pay his $900,000 p.a. interest bill to SCF?
John Key to the rescue?? Or the end of the line for this once proud company?

Misc

Billy Boy
14-07-2009, 06:15 PM
Rainey , the exposure to the Ag sector is nothing compared to the Property Development sector. A quick search of 'Satuit Properties Ltd' on the Companies site will tell a story ... and undisclosed story at that ... bit like Fiji ...and so many more if you care to do some research!
Has anyone asked how CEO Lachie Mcleod is managing to pay his $900,000 p.a. interest bill to SCF?
John Key to the rescue?? Or the end of the line for this once proud company?

Misc

Have just returned from the deep south.....
and the great white farthers are saying....
You are spot on Misc...
Lachie !!! problem....
The South is too small to wheld "Jafa type Sh*t".
SFC is fine, Just needs some day to day tweeking....
Watch this space.....
Cheers to all
BB ;)

bermuda
14-07-2009, 08:45 PM
Have just returned from the deep south.....
and the great white farthers are saying....
You are spot on Misc...
Lachie !!! problem....
The South is too small to wheld "Jafa type Sh*t".
SFC is fine, Just needs some day to day tweeking....
Watch this space.....
Cheers to all
BB ;)

BB,
My sources predict a very tenuous time for SCF. One source told me to get out quite a while ago....and I am so glad I did.

rainey
15-07-2009, 04:33 AM
Could someone please explain how the govt gaurentee works for investors in this company. I dont have money in, but am close to an organisation that has

The Doctor
15-07-2009, 06:05 AM
goes tits up...you get your money back...no interest of course.

Jay
15-07-2009, 06:54 AM
As long they have not broken any rules!

whatsup
15-07-2009, 07:43 AM
Rainey , the exposure to the Ag sector is nothing compared to the Property Development sector. A quick search of 'Satuit Properties Ltd' on the Companies site will tell a story ... and undisclosed story at that ... bit like Fiji ...and so many more if you care to do some research!
Has anyone asked how CEO Lachie Mcleod is managing to pay his $900,000 p.a. interest bill to SCF?
John Key to the rescue?? Or the end of the line for this once proud company?

Misc
Mis...., One way some of these financial type organisations help to "pay" interest is for them to allow the borrower to "capatalise" the interest payments, a very dangerous practise indeed as that really is either compounding or doubling up on the interest owed!!!

rainey
15-07-2009, 08:38 AM
Thanks all for info

Snoopy
15-07-2009, 09:04 AM
BB,
My sources predict a very tenuous time for SCF. One source told me to get out quite a while ago....and I am so glad I did.


Old Alan Hubbard, he went to his cupboard.
To offer his farmer friends a loan.
When he got there, the cupboard was bare.
So they were marched off their lands, with a groan.

Surely Bermuda, it hasn't come to *t h i s*

SNOOPY

Billy Boy
15-07-2009, 10:52 AM
BB,
My sources predict a very tenuous time for SCF. One source told me to get out quite a while ago....and I am so glad I did.
Greetings bermuda :)
My info suggest "tenuous times " for SCF but not Belly up Stuff.
Bitting the bullet stuff for the shareholder(s).
South Canterbury is much like the Southland mentality... A large
number of Do'er old buggers who will stick with things regardless.
Southland Savings Bank an example.
There is a lot of money stashed away in them's there plains.
(Blockhead will tell you)
I have some dosh in with them, comes due next year. So will be
under John'y Smirf's umbrella.
A man said " Could the Govt let them go broke ???" Interesting
thought......
Cheers old Son
BB :):)

winner69
15-07-2009, 11:13 AM
Intersting how the govt guarantee affects pricing of SCF bonds/notes

Those maturing before the guarantee end date yielding 7% but the 2011 ones are at 14% and the 2013 ones at 16/17%

Probably how the market sees the risk which could make it interesting if they go after more market money soon .... but suppose 10% and recomendations from the likes of Lee and others would get them over the line

Are those Perpetual Preference Shares government guaranteed?

Snapper
15-07-2009, 11:28 AM
goes tits up...you get your money back...no interest of course.

You get interest up to the day of default

sharer
15-07-2009, 02:12 PM
I would also like to know what effect the Govt guarantee scheme has on these, if any.
Unfortunately on IPO i reccomended them to a charitable trust i'm on, & recall we were told they were considered safer than govt stock at the time! Both we, & our advisor, assumed they were like bonds, didn't realise they apparently are just pref shares.

biker
15-07-2009, 03:31 PM
goes tits up...you get your money back...no interest of course.

A good reason why you need to do your own research. Yes, all your capital back, but you do get all your interest as well. And SCF were still offering 10.25% for 18 months, after the guarantee came into effect.

rainey
15-07-2009, 04:48 PM
Hmmmm high interest high risk

biker
15-07-2009, 05:09 PM
Hmmmm high interest high risk

Zero risk (and you don't get that very often) when it is guaranteed by the NZ tax payer.

Misc
15-07-2009, 09:19 PM
Zero Risk?? No such thing. Ever tried lodging a largish insurance claim , and seen a sudden loophole or force majuere or disclaimer appear? The Govt gaurantee is only as good as the reasonable disclosure of the companies state of affairs at the time they entered the scheme. If this was in any way 'fudged' then the Govt has their 'out'. Hence perhaps the near-term 'gauranteed' bonds 'gapping up' today?

M

shasta
15-07-2009, 09:26 PM
Zero Risk?? No such thing. Ever tried lodging a largish insurance claim , and seen a sudden loophole or force majuere or disclaimer appear? The Govt gaurantee is only as good as the reasonable disclosure of the companies state of affairs at the time they entered the scheme. If this was in any way 'fudged' then the Govt has their 'out'. Hence perhaps the near-term 'gauranteed' bonds 'gapping up' today?

M

Totally agree Misc, its all in the fine print & no one reads it, cos they look silly if they do.

I had income protection insurance, with a 2 year no claim waiver for ALL pre-existing conditions.

I tried to claim in year 3 (or 4?) & guess what... :(

If your facing higher risk you really do need a much higher reward to compensate, & again i agree the Govt will have the lawyers ready to back out.

Would be a shame to see SCF go down (if it does) i thought it prided itself on not lending money to property sharks :rolleyes:

Misc
15-07-2009, 10:58 PM
Shasta , yes would be a real shame if it folded , but reminds me of the 'once proud' NZI that got caught up in the reckless lending spree of 1986/7 and nearly bought it to its knees , no institution escaped the 1987 meltdown intact , and this time round its far worse imo , so at very least SCF will have to write off hundreds of mills of bad debt and can really only be saved by the Govt , if they chose to do so. Hard to fathom why Hubbard took his hand off the rudder here. I can see the only finance companies enduring being those bank owned entities like Marac et al , which can only harm the property sector and the economy in the next year or 3.

M

biker
16-07-2009, 05:38 AM
Zero Risk?? No such thing. Ever tried lodging a largish insurance claim , and seen a sudden loophole or force majuere or disclaimer appear? The Govt gaurantee is only as good as the reasonable disclosure of the companies state of affairs at the time they entered the scheme. If this was in any way 'fudged' then the Govt has their 'out'. Hence perhaps the near-term 'gauranteed' bonds 'gapping up' today?

M

And watch the political mayhem if the Govt backed out of their guarantee- regardless of the fine print, and especially SCF. Not to mention the implications for the Australia Govt guarantee as well. No, the tax payer is firmly behind SCF and besides, the outfit isn't actually in dire financial trouble anyway.

The Doctor
16-07-2009, 06:02 AM
certainly showing some familiar symptoms....for a finance coy...thats not in trouble!

Contrarian
16-07-2009, 06:33 AM
Gidday

Let's look at some other issues.

Recently there was consensus that there was only two rock solid finance co's Marac & SCF.

Long successful history.

Main man the richest south islander est $650 mill.

Not quick,showy boomtime money. A conservative gentleman, similar to Warren Buffett.

Talk of a possible one notch downgrade sends you guys into a "the sky is falling" mode.

IMHO there won't be a problem. Time only will tell.

winner69
16-07-2009, 07:31 AM
............. Hard to fathom why Hubbard took his hand off the rudder here.

M

..... all part of the succession planning strategy the board has (so they say) ..... heck the guy is over 80 apparently .... prob still sahrp as ..... but life expectancy falls by the day

COLIN
16-07-2009, 01:48 PM
Gidday

Let's look at some other issues.

Recently there was consensus that there was only two rock solid finance co's Marac & SCF.

Long successful history.

Main man the richest south islander est $650 mill.

Not quick,showy boomtime money. A conservative gentleman, similar to Warren Buffett.

Talk of a possible one notch downgrade sends you guys into a "the sky is falling" mode.

IMHO there won't be a problem. Time only will tell.

Good to see a dose of realism being brought to bear, at last! I have watched all the reef fish darting towards the shallows while I shake my head in disbelief. It can only be non-Mainlanders who believe that SCF "is going down." And, believe me, I would have to be one of the most sceptical when it comes to assessing the viability of the non-banking sector - SCF is miles removed from your Hanovers, Bridgecorps, et al.
But all this hysteria has provided me with some wonderful buying opportunities in SCF. Thank you.

(By the way, Marac is NOT bank-owned, as someone has claimed in an earlier post. It is owned by PGC, who have been talking about getting a banking licence but I would suggest that they might have other pre-occupations right now, the way PGG is looking.)

winner69
16-07-2009, 02:06 PM
But all this hysteria has provided me with some wonderful buying opportunities in SCF. Thank you.



Bonds etc are at times good trading things ..... glad to see you taking the opportunities with the likes of HBY and SCF Colin ..... these things get beaten down more than shares quite often and provising liquidity OK worth dabbling in

sharer
16-07-2009, 02:09 PM
.....
(By the way, Marac is NOT bank-owned, as someone has claimed in an earlier post. It is owned by PGC, who have been talking about getting a banking licence but I would suggest that they might have other pre-occupations right now, the way PGG is looking.)

The one owned by ANZ is UDC.

Steve
16-07-2009, 03:04 PM
To clarify on a point made a few days ago regarding lack of disclosure on related party lending etc, does listing debt securities require a lower level of on-going disclosure than listing equity securities?

Both markets are run by NZX, so I would have thought the same rules apply?

Contrarian
16-07-2009, 07:15 PM
Gidday

No disrespect to sharer only a 2 year newbee, I was scanning the left hand margin to see how long we have been kicking around, I've been here for seven years OMG! & even before that on the previous format,
COLIN here for 9.5 years !!

Hope you are all well & doesn't time fly when you are having fun?

temuk
16-07-2009, 08:24 PM
heck the guy is over 80 apparently .... prob still sahrp as .....

correct! And still drives his 35 year old VW to work every day.

COLIN
16-07-2009, 11:13 PM
Gidday

No disrespect to sharer only a 2 year newbee, I was scanning the left hand margin to see how long we have been kicking around, I've been here for seven years OMG! & even before that on the previous format,
COLIN here for 9.5 years !!

Hope you are all well & doesn't time fly when you are having fun?

Gee, is it as long as that. Yes, I do have grey hair, but unfortunately that doesn't always guarantee respect these days! And I'm not quite as old (or as investment-savvy) as Alan Hubbard.
Someone asked whether the perpetuals were Govt-guaranteed; the answer is "no". The company can also suspend the dividend payments on these, but I would be very surprised to see them do this as such action would badly shake the confidence of their thousands of loyal investors, something that AH would do everything in his power to avoid.
I have actually been "putting my money where my mouth is" and buying the prefs lately - the current severely-depressed price levels are just too tempting to bypass. What has to be remembered is that AH would lose every cent of his ordinary equity in the company (and he owns by far the majority of the Southbury shares) before the preference shareholders lose a bean.
I don't think it is beyond the realms of possibility that some tie-up between SCF/PGC/Marac/PGW will emerge over the coming months. Hubbard came to the aid of Norgate, gaining a foothold in PGW for his "generosity", but I believe there is a longer game in all this. Norgate has his back to the wall; the market's sensing of this is reflected in the slump in the PGW shareprice; and PGC has to deal with its PGW involvement before the way can be cleared for it to obtain a banking licence for Marac. Put all this into the pot, add any other seasonal morsels you can find, stir until an even consistency is achieved, and simmer for 6 months!
And also don't be surprised if SCF preference shareholders are offered the opportunity to convert to ordinary capital, as part of an overall restructure. Remember, this was a course that SCF were comtemplating two or three years ago when they were considering an IPO of ordinary shares, but they pulled back. Given that AH has now accumulated a few more years and thus succession planning becomes even more to the fore, and given that original investors in the public pref issue have seen a 60% decline in the market value of their outlay, I feel reasonably confident that he would be thinking along these lines.
I am also of the view that an AH underwrite of SCF losses would be of greater strength than the recent PGC underwrite of Marac's losses.

Dr_Who
17-07-2009, 06:51 AM
heck the guy is over 80 apparently .... prob still sahrp as .....

correct! And still drives his 35 year old VW to work every day.

Alot of very sharp and experienced investors have lost alot of dole in this financial market downturn and AH is no exception.

Colin, why would one want to tie up the four companies you have mentioned? How would a tie up solve their current problem?

COLIN
17-07-2009, 10:41 AM
Colin, why would one want to tie up the four companies you have mentioned? How would a tie up solve their current problem?

The old saying: "Necessity is the mother of invention" springs to mind.
UDC (ANZ-owned) MARAC and SCF are the only Finance Companies of any substance left in NZ, with BBB- investment- grade ratings or above. Both MARAC and SCF are under pressure from severe impairment of loan assets. Of these two I suggest that SCF is the stronger one. PGC is aiming to get a banking licence for MARAC but that quest must be an uphill road at the moment, not the least difficulty being the requirement for PGC to dispose of its PGW shareholding. And rationalisation would clearly require the injection of outside capital.

All I am saying is: "Watch this space."

srotherh
17-07-2009, 02:35 PM
The old saying: "Necessity is the mother of invention" springs to mind.
UDC (ANZ-owned) MARAC and SCF are the only Finance Companies of any substance left in NZ, with BBB- investment- grade ratings or above. Both MARAC and SCF are under pressure from severe impairment of loan assets. Of these two I suggest that SCF is the stronger one. PGC is aiming to get a banking licence for MARAC but that quest must be an uphill road at the moment, not the least difficulty being the requirement for PGC to dispose of its PGW shareholding. And rationalisation would clearly require the injection of outside capital.

All I am saying is: "Watch this space."

Trouble is Colin there is too much space and not enough detail
I bet many more people than view this forum are "Watching This Space" and very nervously I might add.

Misc
17-07-2009, 02:54 PM
The 'play' here would be to borrow SCFHA stock and short the bejesus out of it ... there will be other 'Colins' around who are blindly buying the stock imo.

There is a massive dilution coming , at best!

Misc

Capitalist
17-07-2009, 02:56 PM
Gidday

Let's look at some other issues.

Recently there was consensus that there was only two rock solid finance co's Marac & SCF.

Long successful history.

Main man the richest south islander est $650 mill.

Not quick,showy boomtime money. A conservative gentleman, similar to Warren Buffett.

Talk of a possible one notch downgrade sends you guys into a "the sky is falling" mode.

IMHO there won't be a problem. Time only will tell.

The 'main man' sounds a lot like Eric Watson...except for the showy bit.

The rest of the post sounds like Hanover's PR.

macduffy
17-07-2009, 03:50 PM
The 'main man' sounds a lot like Eric Watson...except for the showy bit.

The rest of the post sounds like Hanover's PR.

I don't think you could get two operations more dissimilar than SCF and Hanover.
The former is, as Contrarian says, a long established conservative firm with a long history of profitable trading with a "main man" who is eveything that EW isn't.
They seem to have overstretched themselves a bit in property lending but I'm picking that they have the financial strength to see them through. Might have to follow Colin in having a closer look at the pref shares.

;)

macduffy
17-07-2009, 04:04 PM
Ok I wouldn't touch finance companies with a barge pole but I am still trying to get some clarity here:

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

quite clearly refers to a 37% yield. Yet others have said it is actually priced at 37c. What is the story here? Is the NZX site misleading?

The price today was 37.5c to give a running yield of around 25%.

Balance
17-07-2009, 04:09 PM
Can anyone enlighten us as to how much of Hubbard's wealth is represented by his shareholding in SCF?

I recall a few years ago that part of SCF was going to be floated and it represented half of his net worth.

Point is that SCF now needs money from Hubbard rather than the other way round.

winner69
17-07-2009, 04:23 PM
Ok I wouldn't touch finance companies with a barge pole but I am still trying to get some clarity here:

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

quite clearly refers to a 37% yield. Yet others have said it is actually priced at 37c. What is the story here? Is the NZX site misleading?

NZX site a bit confusing but look at the value of the trades and it becpmes clear that it is 37.5 cents per share ... like today 3 trades $15,750 for 42,000 units (shares)

Pretty cheap eh ... if people on here are going to stock up on these the proce will go up eh

Dr_Who
17-07-2009, 04:32 PM
Alot of investors are going to lose alot of money here. The signs are on the wall, yet we hear nothing from the NZSE. What will the NZX do to safeguard investors?

Misc
17-07-2009, 06:08 PM
Yield is 'reset' each 1st Oct. Currently 9.42% but will drop to 4.8% or so this Oct. The % yield is based on the $1 issue price NOT the market price (37.5c today).

The company does have the option of suspending payments at any time Im told.

http://www.nzx.com/markets/NZDX/SCFHA/announcements/4712504

Misc

winner69
17-07-2009, 06:57 PM
Yield is 'reset' each 1st Oct. Currently 9.42% but will drop to 4.8% or so this Oct. The % yield is based on the $1 issue price NOT the market price (37.5c today).

The company does have the option of suspending payments at any time Im told.

http://www.nzx.com/markets/NZDX/SCFHA/announcements/4712504

Misc

Yep Misc ... prospectus says 'Although it is the Company's current intention that Dividends be paid ......... it has the right to cancel the payment of Dividends .... at any time .....the payment of dividends .... is not promised or guaranteed'

Reason for cancelling dividend is payment of such would cause the Company to become insolvent or break banking convenants .... or for any other reason determined by the Board


Come October 1 rate reset to 5% -6% (ie 5 cents) still good return on todays price of 37.5 cents

Balance
17-07-2009, 07:17 PM
Yep Misc ... prospectus says 'Although it is the Company's current intention that Dividends be paid ......... it has the right to cancel the payment of Dividends .... at any time .....the payment of dividends .... is not promised or guaranteed'

Reason for cancelling dividend is payment of such would cause the Company to become insolvent or break banking convenants .... or for any other reason determined by the Board


Come October 1 rate reset to 5% -6% (ie 5 cents) still good return on todays price of 37.5 cents

Fixed interest return for equity risk? No thank you!

winner69
17-07-2009, 07:24 PM
Fixed interest return for equity risk? No thank you!

Equity risk with a liquidity problem as well .......makes you wonder whether punters knew what they were buying in the first place doesn't it ..... that 10% sounded good in 2006 didn't it

Misc
19-07-2009, 11:51 AM
SCF related-party lending faces severe prune under draft rules

South Canterbury Finance (SCF), the finance group whose investment-grade credit rating is being supported by its biggest shareholder, would face a severe pruning of related-party lending under the central bank's draft rules for non-bank deposit takers.

The draft, put out for submission in December, proposes capping aggregate exposure for NBDTs at 15% of Tier 1 capital. That would require SCF to reduce related party lending to just $14 million from $170 million, according to Forsyth Barr analyst Luke Angus.

Based on the firm's accounts for the first half ended December 31, related party lending soared 165% from six months earlier, with the biggest gain to parent Southbury Group, founder Allan Hubbard's investment arm.

SCF announced a $58 million impairment on non-performing investments and doubtful property assets for the year ended June 30, resulting in a loss before tax of $37 million. Hubbard is injecting $40 million of new capital into SCF and is finalising an underwrite agreement to cover any further impaired loans.

Hubbard is regarded as a key strength for SCF, as evidenced by Southbury's decision to acquire $89.6 million of loans from the firm in the first half. Still, Forsyth Barr's Angus said related party lending "needs to be significantly reduced."

"We generally view related party lending as a negative from a credit risk perspective due to the lack of independence," he said.

SCF's total equity at June 30 was $236 million, made up of $120 million of preference shares and $116 million attributable to Southbury, according to the report.

Hubbard is "a strong and supportive shareholder, though there is a limit to the owner's ability it support SC," Angus said. "We also believe a succession plan would provide additional comfort, given the reliance on an individual shareholder."

Hubbard, reportedly 80 years old, is chairman of SCF and one of four directors.

Standard & Poor's last week affirmed SCF's BBB- credit rating, which it placed on Creditwatch negative. That means there is a one-in-two chance the firm will lose its investment grade rating in the next three months, which may place further strain on its balance sheet.

S&P credit analyst Derryl D'silva cited SCF's decision "to shift its holdings of liquid assets from cash to higher risk and high-yield investments has increased the risk profile of the company and weakened its liquidity."

Under the terms of its $125.2 million US private placement, a credit rating downgrade could trigger a repayment demand.

SCF chief executive Lachie McLeod this month said the company is considering external sources of new equity to strengthen the company's position over the next six months.

Submissions on the central bank's draft rules closed in February and work is continuing on the final version, according to spokesman Mike Hannah.

winner69
19-07-2009, 12:43 PM
Misc ... that could make life a bit difficult

Interesting looking at the movements in the balance sheet from June 08 to Dec 08.


- Advances went up by $160m (good for a growth company) but $106m of the increase was to related parties. So advances to other parties (the reason they are in business I would have thought) only went up $54m (4%)
- Share/investments went up $56m the bulk of which was a new categorisation called 'Held to maturity Assets' which was a nice round $48m (exactly $48m).
- Property Plant went up $50m odd - so buying a lot of tangible stuff which isn't always the job of a financial company Total PPE nw double what it was it was a year prior

All this funded by a reduction in cash of $80m and added borrowings of $200m

Like to know what these assets held to maturity are as well why the sudden surge in buying property/plant.

The last 6 months of last year did see significant movements in related party tranasctions, particularly relative to other lending

Be interesting to see the full year accounts to June 09 to see whats happened in the last six months ... but as gaynor pointed out not always easy to track movements with different categorisations popping up now and again

Balance
19-07-2009, 01:44 PM
Resets trading at 37.5c - SCF should be buying them back as it is impossible to lend or invest in anything else offering such spectacular returns?

Biggest vote of confidence will be SCF or Hubbard offering to buy them back.

Balance
19-07-2009, 02:06 PM
Capitalist and others banks and fund managers have a vested interest in keeping you out of finance company debentures. They want you to invest in managed funds thet gross you less than 2% and if they did not have competition from finance companies what would the banks offer you in interest maybe 0.2% to make their managed funds look good. And they would probally increase mortgage and loan rates by at least 2% due to lack of anywhere else to obtain loan money.

Warning way back in 2005 - credit where credit is due.

The Doctor
19-07-2009, 02:31 PM
'Advances went up by $160m (good for a growth company) but $106m of the increase was to related parties. So advances to other parties (the reason they are in business I would have thought) only went up $54m (4%'.....

when did the govt guarantee kick in?

Misc
19-07-2009, 02:51 PM
October 12th 2008

winner69
19-07-2009, 03:28 PM
Suppose Hubbard/Southbury can afford to prop up SCF .... they've taken $57m in dividends out the last 2 years .... best part of $100m in the last 4 years and leaving a small amount as retained earnings

Not too bad for a $45m investment topped up with another $25m in F2008

The poor old perpetual preference shareholders (who probably didn't know they were buying equity anyway) have $120m invested and over the last 2 years they have only got $15m of the profits

Good on AH making the most of this money machine

Misc
19-07-2009, 04:06 PM
You still considering buying some prefs Winner69?? LOL .. looking more and more like Hanovers 'big brother here' .. doesnt it??

Misc

Balance
19-07-2009, 04:14 PM
Chris Lee, the Kapiti Coast stockbroker, reckons SCF is okay and market does not understand how strong SCF and AH are. Reckons advisors telling their clients to sell out of SCF's bonds have questionable judgement.

http://www.chrislee.co.nz/index.php?page=newsletter-display&list=1&month=July&year=2009

macduffy
19-07-2009, 04:32 PM
Cris Lee is probably right although he has been known to make mistakes, like all of us!

If I held the pref shares I wouldn't be selling at these prices but I won't be buying either. There's enough excitement in buying equities without also taking high risks with fixed interest investments, especially ones as opaque as SCF seem to be.

Steve
19-07-2009, 04:35 PM
There was an interview with AH in the Independent this week in which he touched on some of the related party lending.

Dr_Who
19-07-2009, 05:23 PM
Any finance firm with related party lending is a SELL in my books.

Misc
19-07-2009, 06:29 PM
The Govt Gaurantee is 'goneski' for SCF by October by the look unless they can reduce related party lending to under $15m (based on previous posted article). That would have the effect of collapsing Southbury , as despite SCF saying the related party lending is 'some of their best lending' , its unlikely other lenders would see it that way. Perfect Storm for Alan Hubbard??

Misc

winner69
19-07-2009, 06:35 PM
Misc ... those loans to Ellis look a bit of a mess eh

Interesting they seem to have caught up with a few woeful hawkes bay developments ... is that the Kelt connection going a bit of track

Misc
19-07-2009, 06:57 PM
Winner , the Kelt book is likely badly impaired for the simple reason that Kelt Capital (owned 100% by Sam Kelt) competes with Kelt Finance (75% SCF). So you could imagine which entity gets the 'good loans' and which gets the 'others' . A massive conflict for Kelt and a deal that raised a few eyebrows at the time , very 'unHubbard' to deal with glitterati wide boys with anger management issues?

The recievership of Satuit Properties Ltd in Napier (SCF owed $15m) is another Bay deal gone bad. 1st recievers report states recovery factor 'unknown'. This type of situation will rife in the lending book , most developers have now flown the white flag.

How is it that Chris Lee et al cannot perform this simple due diligence prior to 'advising' grannys on their nest eggs??

Misc

winner69
19-07-2009, 07:19 PM
Winner , the Kelt book is likely badly impaired for the simple reason that Kelt Capital (owned 100% by Sam Kelt) competes with Kelt Finance (75% SCF). So you could imagine which entity gets the 'good loans' and which gets the 'others' . A massive conflict for Kelt and a deal that raised a few eyebrows at the time , very 'unHubbard' to deal with glitterati wide boys with anger management issues?


Misc

Sam Kelt and Allan Hubbard would be complete opposites and a strange combination to do business together

Sam Kelt and Eric Watson seem to have a lot in common .... race horses, sponsoring sports teams, glitzy night outs, posh functions and all that ... except that Eric does seem to win the physical encounters he gets into unlike Sam (esp against boy racers) ..... couldn't even imagine Alan H ever getting into trouble

maybe Mcleod got on OK with the kelts

BRICKS
20-07-2009, 08:46 AM
Sam Kelt and Allan Hubbard would be complete opposites and a strange combination to do business together

Sam Kelt and Eric Watson seem to have a lot in common .... race horses, sponsoring sports teams, glitzy night outs, posh functions and all that ... except that Eric does seem to win the physical encounters he gets into unlike Sam (esp against boy racers) ..... couldn't even imagine Alan H ever getting into trouble

maybe Mcleod got on OK with the kelts

IS this company in real or any type of trouble or do we just like to moan about PEOPLE..

Jay
20-07-2009, 12:04 PM
It might be soon if a few more read this thread and decide they want their money out!
Then speculation/rumour/made up facts all become true!

whatsup
20-07-2009, 12:17 PM
Which would be sad Jay as in the past (going back from before 2006 ) SCF has been the back bone of many a fledging S I business and without it many a small business wouldnt have gotten off the ground, lets not all put the boot in here, this is / was a good finance house not the spivvy Auckland types, Nathans,et al.

Jay
20-07-2009, 03:29 PM
My tounge was firnly in my cheek whatsup.
However I agree, it would be sad.
Just some seem to be talking of it as a foregone conclusion

COLIN
21-07-2009, 09:10 PM
Looks like PGC is going it alone - well, at this stage, anyway, although today's announcement did make mention of Kerr's asset management vehicles expanding into acquiring other assets in addition to MARAC's toxic property development related debts.
SCF will probably have to come up with its own "Bad Bank" solution, into which it can quarantine its own toxic waste.

winner69
29-07-2009, 11:29 AM
Director Borland on his way out ... hope he repays the $5m rerlated party loan

Hey this could be the strategy to reduce related party loans .... get those involved to resign .... and hey presto not related party anymore

Just being cynical

LATER ON

Sorry guys ... got the story wrong ... Borland has resigned from Southbury Group and not SCF. He was never a director of SCF

sharer
29-07-2009, 01:18 PM
...Hey this could be the strategy to reduce related party loans .... get those involved to resign .... and hey presto not related party anymore

Just being cynical

Or practical. You could be right on there.
Better keep a close watch out. (We can be sure the NZX won't be bothered).

Misc
29-07-2009, 03:15 PM
Where did you read that Winner69?? No release to the NZX that I can see.

winner69
29-07-2009, 06:16 PM
Where did you read that Winner69?? No release to the NZX that I can see.

Sorry guys ... got the story wrong ... Borland has resigned from Southbury Group and not SCF. He was never a director of SCF

My fault ... must lsiten to the water cooler gossip a bit more closely eh

Gossip said he might take over some of Hubbards duties

clips
29-07-2009, 08:27 PM
don't tell me...first name Al..?

Misc
29-07-2009, 08:46 PM
At 10% interest Lachie McLeods interest (alone) bill is $1.5m p.a ... how does he pay that ?? Or do one of Colins '1st 4 ships funds' sponsor him?
And what of the Kelt Finance Fiji fiasco??

Misc

Balance
29-07-2009, 08:57 PM
SCF has to become totally transparent to regain market support. The dance of the seven veils so far of selective disclosure simply will not do.

whatsup
30-07-2009, 09:47 AM
Mis, Some of the finance co's in the past collatolorise the interest depending on several circumstances, security, loan comfort,relationship,industry and your eventual ability to pay ( job security).

Misc
01-08-2009, 05:19 PM
Warning for finance companies
4:00AM Saturday Aug 01, 2009
By Dene Mackenzie


Bill English says firms must meet new standards to be part of guarantee scheme.
Finance Minister Bill English yesterday warned finance companies to sort themselves out as he considers what to do with the retail deposit guarantee scheme.

The scheme, introduced by the previous Labour-led Government during last year's election campaign, is set to run out in October 2010.

The opt-in scheme covers all retail deposits of participating New Zealand-registered banks and retail deposits by locals in non-bank deposit-taking entities. This includes building societies, credit unions and deposit-taking finance companies.

The deposit guarantee scheme does not include related party liabilities.

In an interview yesterday, English indicated he was considering what would happen to the scheme after October next year, particularly in how it affected the non-bank deposit takers, such as finance companies.

"They are keen to know what we are considering. They tell me people are putting money into them until the end of September 2010. That build-up could all disappear after that."


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The choices for English were: stopping the scheme, extending it, or lining it up with Australia - which was particularly important for New Zealand banks.

Reserve Bank of Australia Governor Glenn Stevens said this week that it would soon be time for banks in Australia and abroad to begin borrowing funds in wholesale markets without the backing of government guarantees.

"I think it will soon be time for banks everywhere, including here, to borrow in their own right," he said.

He noted banks would soon need to reduce their reliance on government guarantees to support fund-raising activity in wholesale credit markets.

"It would make sense for Australian banks, which have accounted for 10 per cent of global issuance of government guaranteed bank debt over the past nine months, to step up their efforts to do so," he said.

English said the wholesale guarantee scheme in New Zealand was taken on an issue-by-issue basis and he expected the scheme to wind itself down as banks started borrowing offshore on their own records.

However, the retail scheme would change. The Government wanted to minimise its losses. At present, if an institution got into trouble, the taxpayers picked up the tab.

The Government also wanted to ensure the system did not become unstable as the stability of New Zealand's financial system had been an advantage.

Now, everyone had to take a guess at what the asset values were backing up a finance company, he said. The kinds of assets behind those companies were not easily traded in these times.

As the economic recovery started, those asset values could increase, making it easier for deals.

But one thing he could guarantee was that whether the scheme ended or changed, things would be more challenging for finance companies wanting to be part of the guarantee, English said.

"You have to keep in mind that before the guarantee runs out, these organisations have to meet the Reserve Bank's new standards for non-bank deposit takers."

Those new standards had been coming in for 12 months and required the institutions to get a credit rating and meet liquidity requirements.

"These institutions have to sort themselves out and we are keen to see signs they are sorting themselves out. We don't want them sitting there thinking the Government will fix it all for them." A guarantee was always a temptation for investors, English said.

bermuda
01-08-2009, 08:15 PM
Deane,
Good Post Mmmmate.

winner69
07-08-2009, 08:23 AM
Not a good look


South Canterbury man in hot water

NBR staff | Friday August 7 2009 - 07:54am

Top Timaru lawyer and South Canterbury Finance chairman Edward Sullivan has lost his attempt at name suppression and reporting of a complaint by the Law Practitioners Disciplinary Tribunal last October.

He and fellow legal practitioner John McGlashan have been found guilty of professional misconduct in the case brought against them by the Canterbury District Law Society.

The sum of $100,000 had become due to a client’s account but they deducted fees of $22,022 against the client’s instructions for fees they claimed were outstanding.

Judges Panckhurst, Gendall and French upheld the complaint that the lawyers had acted without permission, against client instructions and had abused their trust.

Balance
09-08-2009, 09:57 AM
Worries me when SCF has a stretched balance sheet with $170.2m advanced to related parties, and Hubbard is still talking about more dairy farm exposure.

Article also raises a pertinent question - did SCF bailed out ANZ and other banks from their exposure to Hubbard?

Let's hope Hubbard can pull this one out of the fire.

http://www.stuff.co.nz/business/2733341/Southern-exposure/

Southern exposure
By GREG NINNESS - Sunday Star Times Last updated 05:00 09/08/2009

Allan Hubbard has not let the hard times facing the dairy sector dampen his enthusiasm for pumping money into the industry.

"I just wish I had another billion [dollars] and I'd put it all into dairy farms," he said.

Hubbard is probably this country's biggest private dairy farm owner, controlling a one-third stake of Dairy Holdings, the country's largest corporate dairy farmer and interests in another 14,000ha of farmland which range from lush Southland farms to arid high-country stations.

His enthusaism for the sector was buoyed last week by the 25% rise in the price Fonterra is receiving for its milk powder.

He believes that if that trend continues, it could result in Fonterra's farmer shareholders, of which Hubbard is probably the biggest, receiving an extra $1 per share in their dividends.

"If you are forward-looking, you'd see the dairy industry is not going down the gurgler, it's the saviour of New Zealand," he said.

And he has been putting his money where his mouth is.

Last year Hubbard took out a $150 million mortgage with ANZ on five rural properties he and his wife Margaret own, to buy more of them.

And it says something about the depth of his pockets that most of that money had already been repaid.

"It [the loan] is only around $35m at the moment," he said.

Although farming may be Hubbard's great love, it is South Canterbury Finance (SCF) which has been requiring most of his attention over the past couple of months.

Much of Hubbard's considerable fortune is invested through his private investment vehicle Southbury Group, in which he and wife Margaret and their associated trusts hold a 73% stake. Southbury holds all of the ordinary shares in SCF.

With assets of about $2.2 billion, SCF is the country's third largest finance company but at the end of June it reported its first loss since the Great Depression, largely as a result of its property lending.

Hubbard responded to that by pumping an extra $40m into the company for working capital as if all he had to do was reach into the petty cash tin for the money. He is also providing SCF with a personal underwrite agreement whereby any SCF loans that become impaired will be secured against his private fortune.

Although those moves will strengthen SCF's balance sheet, it is not the end of SCF's problems.

Concerns about related party lending between SCF and other companies with which Hubbard is involved have dogged the company, while worries about its exposure to the property and dairy sector have put it at risk of a credit rating downgrade.

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There was a sharp increase in SCF's related party lending in the second half of last year, up from $62.6m in June $2008 to $170.2m by the end of December. The company's accounts for the year to June 2009 are yet to be released.

Most of the related party lending in last year's accounts was to other companies within Southbury Group. But SCF also lends to other companies in which the Hubbards have an interest.

Apart from Southbury's stake in Dairy Holdings, the Hubbards have stakes in 22 substantial rural properties with a combined land area of just over 14,000ha.

They own 100% of seven of these properties (1565ha) and partial stakes ranging from 23% to 75% in the others.

They also own stakes in a handful of commercial properties ranging from office buildings to coolstores.

Most of these have a single mortgage to one or other of the major banks, but a couple have second mortgages to SCF.

Hubbard said SCF would sometimes provide loans to the companies which own these investments when they were unable to secure additional funding from the banks.

Moonshine Farms, an 829ha Canterbury property in which the Hubbards are listed as the largest shareholders with a 38% stake, has a second mortgage to SCF securing up to $15m. The security for this loan was increased from $3.84m in January last year.

The first mortgage, securing up to $6.75m, is to ANZ.

Hubbard said Moonshine had borrowed money from SCF because it needed additional working capital but had been unable to secure this from its bank. This loan had since been fully repaid, but the security was left in place in case more money was needed in the future.

SCF had also provided a second mortgage to Viewbank Dairy, a 196ha Canterbury farm 30% owned by the Hubbards, to enable it to puchase some additional land.

Because the farm was involved in a dispute about water rights, the property's first mortgagee, ASB, was not prepared to advance any more money, so SCF stepped into the breach to allow the transaction to be settled.

Another company to have benefited from related party lending from SCF is Broadway Industries.

Broadway is an NZX-listed company in which the Hubbards are the largest shareholders with a one-third stake. The company's main asset is Mercer Stainless which manufactures and distributes a wide range of stainless steel equipment. The recession has not been kind to Broadway and, after posting a loss of $1.87m last year, the company undertook an asset sales and capital raising programme via a rights issue in which the Hubbard's participated to shore up its balance sheet.

To tide the company over until these arrangements could be completed, SCF lent Broadway $2m which was supposed to be repaid once the capital raising was completed although by last week, only $400,000 of the loan had been repaid.

Although Hubbard is confident that all of SCF's lending has met the arm's length test, it is likely to be one of the areas coming in for some attention as SCF tidies up its act ahead of Standard & Poor's decision about whether to maintain the company's BBB- credit rating.

A downgrade could make it more diffcult and expensive for SCF to raise money.

Hubbard said Standard & Poor's had not given him a date by which they wouild make that decision, but he expected it to be about the end of next month, by which time all of the work to strengthen SCF's balance sheet would also be complete.

winner69
09-08-2009, 10:05 AM
Quote from that article linked - Although Hubbard is confident that all of SCF's lending has met the arm's length test,......

However it does seem that there are so many intertwined arms involved its all one big cuddle session

Balance
09-08-2009, 10:20 AM
I have no beef with SCF lending to related parties if they are indeed arm's length and on pure commercial terms and criteria.

The big worry here is that SCF has been increasing its lending to related parties when other financiers are reducing theirs.

winner69
14-08-2009, 07:43 AM
Official now

Marac, South Canterbury Finance downgraded to Junk

http://www.nbr.co.nz/article/marac-south-canterbury-finance-downgraded-junk-107458

adamcz
14-08-2009, 06:52 PM
So probably the biggest problem for them now is the previously trumpeted funding sources. Now they have been reduced to a junk bond status their are implications to the US bond issue.
Seems like a bit of a slippery slope to me

winner69
23-08-2009, 06:30 AM
A capital injection of $40m from Hubbard saved the day .... but it seems as if it was their own money .... woonder if real money actually changed hands?

As the article says .... ...shuffling of assets between SCF and Southbury. Southbury sold its one-third stake in Dairy Holdings to SCF for $75.7m, and in return Southbury pumped $40m back into SCF as new ordinary share capital. ..... It is not known what happened to the $35.7m surplus this would have left in Southbury's coffers

http://www.stuff.co.nz/business/2778373/South-Canterbury-Finance-goes-for-dairy-sideline

Balance
23-08-2009, 08:18 AM
A capital injection of $40m from Hubbard saved the day .... but it seems as if it was their own money .... woonder if real money actually changed hands?

As the article says .... ...shuffling of assets between SCF and Southbury. Southbury sold its one-third stake in Dairy Holdings to SCF for $75.7m, and in return Southbury pumped $40m back into SCF as new ordinary share capital. ..... It is not known what happened to the $35.7m surplus this would have left in Southbury's coffers

http://www.stuff.co.nz/business/2778373/South-Canterbury-Finance-goes-for-dairy-sideline

Probably an exchange of cheques. Of course, real money changed hands.

Dr_Who
23-08-2009, 04:21 PM
Sounds like the wild days of pre 1987, front end loading technique. :mad:

Steve
23-08-2009, 05:06 PM
So it was this reshuffle that ultimately caused the rating downgrade? That's a bit different from the capital-injection spin that was put out...

winner69
24-08-2009, 07:35 AM
...... Now they have been reduced to a junk bond

Not really junk bonds .... just not investment grade at the moment

See the yield on the SCF020 (June 2011) have come down to 11-12% on expectation that the govt guarantee will be extended

The SCF030 (June 2012) yields are still high at 16%

And looking at quitting the SCFHA Prefs I got at sub $40 a while ago .... quick gains there eh

Xerof
24-08-2009, 08:55 AM
Yes, SCF show their arrogance and distain for investors by being cute with their NZX announcements - the early July announcement re capital injection by Mother Hubbard only gave one side of the story - you needed to go to the website for the full picture (amendment to Prospectus 30 July)

But the folks who sold the bonds etc off on that (full) announcement (I think the SCFHA's got as low as 37.5 cents) are the ones paying the price for this arrogance

and by selling now guys, you are a month too late really - it's old news and was priced in at the time - now looks bid to me......

winner69
24-08-2009, 02:58 PM
Yes, SCF show their arrogance and distain for investors by being cute with their NZX announcements - the early July announcement re capital injection by Mother Hubbard only gave one side of the story - you needed to go to the website for the full picture (amendment to Prospectus 30 July)

But the folks who sold the bonds etc off on that (full) announcement (I think the SCFHA's got as low as 37.5 cents) are the ones paying the price for this arrogance

and by selling now guys, you are a month too late really - it's old news and was priced in at the time - now looks bid to me......

Interesting other things noted in that amendement to the prospectus

Like changing the Cash Flow statement for half year to December 2008 to account for the 'capitalised interest' of $25m (out of $111m in the P&L) .... restating the cash flow without this results in a negative operating cash flow of $6m .... which just happens to follow a negative operating cash flow of $8m in the 6 months to June 2008 (period June 07 to Dec 07 was positive $28m)

Gaynor mentioned in one of articles it was hard to keep track of what is going on in SCF because theys get reclassified so often ... I can see what he was getting at

One good thing though ... capitalised interest is still due ... just hasn't been paid yet ... and they collect interest on the unpaid interest as well

whatsup
24-08-2009, 03:24 PM
Interesting other things noted in that amendement to the prospectus

Like changing the Cash Flow statement for half year to December 2008 to account for the 'capitalised interest' of $25m (out of $111m in the P&L) .... restating the cash flow without this results in a negative operating cash flow of $6m .... which just happens to follow a negative operating cash flow of $8m in the 6 months to June 2008 (period June 07 to Dec 07 was positive $28m)

Gaynor mentioned in one of articles it was hard to keep track of what is going on in SCF because theys get reclassified so often ... I can see what he was getting at

One good thing though ... capitalised interest is still due ... just hasn't been paid yet ... and they collect interest on the unpaid interest as well

Isnt" Capitalised interest".... just another way of saying "Compounding interest"?

macduffy
24-08-2009, 03:48 PM
"One good thing though ... capitalised interest is still due ... just hasn't been paid yet ... and they collect interest on the unpaid interest as well."

Yes, assuming that it becomes "collectible" at some stage!

winner69
16-09-2009, 11:44 AM
Things are happening

http://www.nbr.co.nz/article/south-canterbury-finance-lines-new-directors-110946

winner69
16-09-2009, 12:08 PM
Does seem a strange action not to do anything with all new money since August 21st (not alloting the money being the term used)

And Lachie as usual unavailable to clarify further - so no doubt more speculation from the uniformed press - watch this space

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10597679

temuk
16-09-2009, 08:43 PM
The Timaru Herald reported today about the wanaka developer.


6 firms associated with Oakridge resorts were put into receivership on Thursday (Nord Ltd,Oakridge resorts Ltd, Oakridge resorts Holdings Ltd,oakridge land holdings Ltd, oakridge pool and spa resort Ltd and northern link developments Ltd).

Developer Par Hallberg,the sole director of all 6 firms, said money owed to SCF related to unrealised plans for a 48 villa development on 25 hectares beside the resort. After paying for the land and resource consents ,arrangements with an australian buyer fell through." I have lost everything I own."
SCF now own the land,2 restaurants,conference centre, reception, gym,pool and Mr hallbergs own house.
173 rooms at the resort are not included, having been sold to small investers.
Financing the land acquisition and development had been a drain on the resort business.
The cash was being supplied from the operational costs to pay the interest.
SFC refered all questions to the receivers.

This is a brief and may be in more papers tomorrow.

winner69
21-09-2009, 05:39 PM
Reads like another credit downgrade .... but could be just another beat up from the (uninformed) press


South Canterbury Finance put on negative credit watch, 'risks increasing'

http://www.nbr.co.nz/article/south-canterbury-finance-put-negative-credit-watch-risks-increasing-111368

winner69
21-09-2009, 05:48 PM
Yep - put on negative credit watch - there is an announcement from the company

Just having trouble finalising the June accounts .... all will be OK next week

Who put in that cheeky bid for the SCFHA at $21

Balance
21-09-2009, 07:42 PM
Yep - put on negative credit watch - there is an announcement from the company

Just having trouble finalising the June accounts .... all will be OK next week

Who put in that cheeky bid for the SCFHA at $21

May not be that cheeky if the Americans call in their loans? Let's hope sense prevails.

Misc
23-09-2009, 11:40 AM
Looks like the auditors are unable to sign this off as a 'going concern' , without fresh capital , and plenty of it , this is toast! Expect further delays at very best. M

winner69
23-09-2009, 11:57 AM
Looks like the auditors are unable to sign this off as a 'going concern' , without fresh capital , and plenty of it , this is toast! Expect further delays at very best. M

Hey mate -- the auditor problem is only because of a 'peer review'

Yeah right .... you get on top of these things (like peer reviews) and manage your way through it ....... audit clearance not usually delayed cause of the peer review itself but a good story anyway

winner69
23-09-2009, 12:10 PM
Auditors are Woodnorth Myers

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

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

minimoke
23-09-2009, 12:34 PM
..without fresh capital , and plenty of it , this is toast! And where is that going to come from. Synlait are looking for $100m, Silver Fern were after $128m, Fonterra for $1b (and the revised payout forecast is purely coincidental), Pyne Gould are looking for $180m. With a risk of loosing their credit rating and governement guarantee there are a lot of ducks that need to be lined up to claw their way out.

temuk
23-09-2009, 02:31 PM
Auditors are Woodnorth Myers

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

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

Used this firm when I was in busniess, the forementioned gets the big thumbs down
from me!!!!!!!

lakedaemonian
23-09-2009, 04:09 PM
And where is that going to come from. Synlait are looking for $100m, Silver Fern were after $128m, Fonterra for $1b (and the revised payout forecast is purely coincidental), Pyne Gould are looking for $180m. With a risk of loosing their credit rating and governement guarantee there are a lot of ducks that need to be lined up to claw their way out.

VERY good point........those in need of capital appear to be increasing, while those who have capital or access to capital seem to be decreasing.

Is this where global deleveraging impacts head on with increasingly needs for capital at 100KPH?

minimoke
24-09-2009, 08:22 AM
And where is that going to come from. Synlait are looking for $100m, Silver Fern were after $128m, Fonterra for $1b (and the revised payout forecast is purely coincidental), Pyne Gould are looking for $180m. With a risk of loosing their credit rating and governement guarantee there are a lot of ducks that need to be lined up to claw their way out.
oops - i better amend the PGC to $270m. So we now have Synlait, Silver Fern and PGC off the blocks for the race for cash. Fonterra is at the starting gate and SCF are still filling out the entry form.

Stranger_Danger
24-09-2009, 09:24 AM
This sort of situation does raise some interesting questions about the proverbial "cash on the sidelines" that bulls like to talk about.

One interesting feature of the last 6 months is the degree to which a box ticking mums and dads investor could easily have become fully invested, without making a single real investment decision.

In other words, lets say they are generally a "buy and hold forever" type and owned shares in 25 companies in NZ/AU a year or so back. Lots of household names and perhaps a few small/mip caps.

It is quite possible that 10-12 of their holdings have had capital raisings in the last 6-12 months.

Now, ponder this.

(a) Returns on cash are nearly nil.

(b) The new shares are issued at a big discount.

(c) It comes with a big fat document that looks boring.

Anecdotally, I'm sensing that most people are not looking past (a) or (b). If they can find the cash, they take up the new shares.

The result of this is that - without making a single proactive decision - the investor has "doubled up" their exposure to markets, to retain the same (or in issues with institutional placements, sometimes less) exposure to the future profits and dividends of their investments.

Because of the discounted nature of the placements, they've reduced their average price therefore improving their overall portfolio gain/loss and are showing nice gains on the new shares.

There is a psychological "wealth effect" going on here, increasing confidence.

However, the devils advocate view is they've reinvested without making proactive decisions, eaten up their cash buffer, doubled up to retain the same perentage ownership (what are EPS figures going to look like?) and increased their exposure to the same managers that got them here.

It is *totally* a good thing that the capital raisings of the last year have partially restored the balance sheets of the actual businesses we as a community rely on to employ people and provide goods and services.

However, what would happen to investor sentiment should we get a second leg down, and many find out they've (fairly unwittingly) doubled up, erased their buffer, and now both their new and old shares in XXX long term holding are now underwater?

I'd say it would be pretty ugly, and if you need to raise cash, you'd want to have done so before that point.

winner69
24-09-2009, 09:31 AM
This sort of situation does raise some interesting questions about the proverbial "cash on the sidelines" that bulls like to talk about.

One interesting feature of the last 6 months is the degree to which a box ticking mums and dads investor could easily have become fully invested, without making a single real investment decision.

In other words, lets say they are generally a "buy and hold forever" type and owned shares in 25 companies in NZ/AU a year or so back. Lots of household names and perhaps a few small/mip caps.

It is quite possible that 10-12 of their holdings have had capital raisings in the last 6-12 months.

Now, ponder this.

(a) Returns on cash are nearly nil.

(b) The new shares are issued at a big discount.

(c) It comes with a big fat document that looks boring.

Anecdotally, I'm sensing that most people are not looking past (a) or (b). If they can find the cash, they take up the new shares.

The result of this is that - without making a single proactive decision - the investor has "doubled up" their exposure to markets, to retain the same (or in issues with institutional placements, sometimes less) exposure to the future profits and dividends of their investments.

Because of the discounted nature of the placements, they've reduced their average price therefore improving their overall portfolio gain/loss and are showing nice gains on the new shares.

There is a psychological "wealth effect" going on here, increasing confidence.

However, the devils advocate view is they've reinvested without making proactive decisions, eaten up their cash buffer, doubled up to retain the same perentage ownership (what are EPS figures going to look like?) and increased their exposure to the same managers that got them here.

It is *totally* a good thing that the capital raisings of the last year have partially restored the balance sheets of the actual businesses we as a community rely on to employ people and provide goods and services.

However, what would happen to investor sentiment should we get a second leg down, and many find out they've (fairly unwittingly) doubled up, erased their buffer, and now both their new and old shares in XXX long term holding are now underwater?

I'd say it would be pretty ugly, and if you need to raise cash, you'd want to have done so before that point.

S Danger - a very good post and so true

The insto's have been the winners in all this this .... with retail investors owing less of these companys .... and as you say less share of future profits

sharer
24-09-2009, 11:29 AM
I agree with SD & W69 above. Well thought thru post SD, covering several very relevant angles. Some endowment funds i know about are already in exactly the sort of 'drift position' you write about, with substantial amounts recently spent taking up issues & SPPs & still more to come, all without any actual investment plan.
IMHO this emphasises the need to regularly review one's holdings, asking things like: if we didnt already hold this one would we buy it today? - if not try to exit. What conditions are needed to sell out of this one at a profit? - if can find answer then enter orders & try to get cash back. What other things might we invest that cash in that could be better just now? And lots of similar thoughts. My rather conservative bias as trustee for endowment funds is towards a default cash position. But nowadays i'm much more rationally influenced by the likes of the very interesting charts and arguments presented by Phaedrus on this forum. Now i'm comfortable moving between 90% cash and 90% invested currently, & prepared to change tack the day after a wind shift is confirmed.
Several other posters too have offered much useful argument and advice, including the many & varied mistakes which enable the rest of us to learn expensive lessons kindly paid for by generous fellow members of the forum. I can now recognise quite a number of mistakes in my own past efforts - and find it can take a frustratingly long time to unwind past blunders & free up the cash to have another go.
Thanks for the timely warning of drifting investment sink-holes SD !

QOH
25-09-2009, 09:54 AM
If South Canterbury was to go under before the government deposit guarantee lapses, does that mean debenture holders with maturity's expiring after 2010 are covered, or is it only for maturity's that actually mature before then?

Ptolemy
25-09-2009, 10:42 AM
If South Canterbury was to go under before the government deposit guarantee lapses, does that mean debenture holders with maturity's expiring after 2010 are covered, or is it only for maturity's that actually mature before then?

The government guarantee applies only to those debentures that mature prior to 12/10/2010. If the debenture matures after this date it is not covered by the GDG. However, that's not to say that debenture holders outside that date will get nothing - normal receivership and deed rules will apply.

I assume that in the event of Treasury being asked to wrap the company up, all debenture holders are treated equally in terms of their claims on the companies assets and the Gov't only tops up those covered by the GDG. I.e. if assets equal 80c in the dollar, the Gov't tops up the 20c and those outside the GDG get 80c. Perhaps someone with reater knowledge than me can confirm this?

Lets hope that it doesn't come to this - won't be good for anyone (except Ausie banks) if SCF collapses. We need some solid well run finance companies in NZ to keep pricing tension on the banks.

adamcz
25-09-2009, 11:04 AM
I havent read the SCF deed but i know under other deeds that all funds deposited at the date during the guarantee period are guaranteed unless excluded by the $1m cap, non-resident or non-citizen, related party or a financial institution

Balance
25-09-2009, 06:59 PM
The sheer arrogance of this company and its management.


South Canterbury Finance hits back
Christchurch Press
15 June 2009

South Canterbury Finance has become a major topic of conversation in finance circles, with most of the chatter centring on a sharp increase in the company's related- party transactions and its exposure to the ailing dairy sector.

Related-party transactions have been a touchy subject for investors because they have been a common feature of several finance companies which have failed.

South Canterbury is part of Southbury Group, the private investment vehicle of Timaru- based accountant Allan Hubbard.

Its most recent accounts, for the six months to December, show the company had loaned $170.2 million to related parties at balance date, up from $62.2m at June last year.

This included loans totalling $21m to key managers in the Southbury Group at preferential interest rates, including a $15m loan to South Canterbury chief executive Lachie McLeod. They appear to have been used to allow the executives to purchase Southbury shares.

In a complicated shuffling of assets between South Canterbury and various other companies in the Southbury Group, South Canterbury has transferred $89.6m of loans to Southbury and purchased shares in several Southbury subsidiaries, including a $22.5m stake in Scales Corp and Commtest Instruments and $20m of preference shares in Helicopters NZ.

However, the biggest related- party transaction was a post balance-date deal for South Canterbury to buy what are described as "various farming properties", from an unnamed related party for $67.2m.

The size of this transaction at a time when the value of many rural assets is in freefall, and the fact that no further details of the deal are provided is a concern because it is equivalent to nearly 27% of the company's equity.

McLeod dismissed concerns over these arrangements as "great bloody gossip from The Viaduct".

"I think a lot of it is to do with the [dairy] payout drop. We've only got $45m in dairy loans, but everyone thinks we've got hundreds of millions," he said.

As for the related-party transactions, McLeod said South Canterbury had been involved with some of the other companies in the Southbury Group for more than 50 years.

"Some of our related-party lending is the best lending we know," he said.

"It's all about keeping the equity up and increasing the equity side of it. And everything we do, we talk very closely with our auditors [Timaru-based accounting firm Woodnorth Myers], our trustee [Trustees Executors] and of course now we've got a new partner called Treasury [monitoring the Deposit Guarantee Scheme]."

COLIN
25-09-2009, 09:23 PM
IMHO this emphasises the need to regularly review one's holdings, asking things like: if we didnt already hold this one would we buy it today?

I have isolated your above comment, Sharer, because I agree wholeheartedly with it and believe it needs to be stressed. I am trying to adopt this approach increasingly, but it requires a steel will.

As regards SCF: I have no fears whatever regarding my exposure, and in fact have added to it in recent days, at true bargain prices. If PGC can come up with an underwritten ordinary share issue to the extent of $270m then I am certain that Alan Hubbard will be well on the way to piecing together a plan which will place SCF on at least a similar footing. And remember that, unlike PGC, the only listed securities of SCF, i.e. the bonds and the pref shares, all take priority to the ordinary shareholders.

It seems to me that a lot of the commentary on this thread has come from people who have little knowledge of how South Island Incorporated works - its definitely not "white shoes and super yachts" down here! If you want an example of fierce loyalty/parochialism, just study SBS. I also suggest people have a look at www.chrislee.co.nz - I know that Chris has his critics, but he has a far better understanding of SCF and Alan Hubbard's business ethics than most North Island based financial commentators.

(By the way, it should be noted that the article from The Press, posted by Balance, is dated 25 June - hardly hot news.)

Balance
25-09-2009, 09:55 PM
I have isolated your above comment, Sharer, because I agree wholeheartedly with it and believe it needs to be stressed. I am trying to adopt this approach increasingly, but it requires a steel will.

As regards SCF: I have no fears whatever regarding my exposure, and in fact have added to it in recent days, at true bargain prices. If PGC can come up with an underwritten ordinary share issue to the extent of $270m then I am certain that Alan Hubbard will be well on the way to piecing together a plan which will place SCF on at least a similar footing. And remember that, unlike PGC, the only listed securities of SCF, i.e. the bonds and the pref shares, all take priority to the ordinary shareholders.

It seems to me that a lot of the commentary on this thread has come from people who have little knowledge of how South Island Incorporated works - its definitely not "white shoes and super yachts" down here! If you want an example of fierce loyalty/parochialism, just study SBS. I also suggest people have a look at www.chrislee.co.nz - I know that Chris has his critics, but he has a far better understanding of SCF and Alan Hubbard's business ethics than most North Island based financial commentators.

(By the way, it should be noted that the article from The Press, posted by Balance, is dated 25 June - hardly hot news.)

You miss the point of posting the 25 June article - this was before the S&P downgrades. A big reason for the downgrades was the increasing level of related party transactions. SCF arrogantly defended its related party transactions.

South Island Incorporated? SCF has been operated like a private investment company.

As for Chris Lee, he is so insightful he has his clients in finance companies like Hanover, St Laurence, Strategic Finance, etc. He certainly knows how to read that sector well.

Balance
25-09-2009, 10:16 PM
This article in the Sunday Star Times gives a good insight into the advice given on finance companies by Chris Lee. Have a read of this :

http://www.stuff.co.nz/business/personal-finance/2161440/Advice-and-adversity

Excerpts :

"In March 2006 Lee invested the Lindsays' money in Hanover Capital, but in October the next year he withdrew support for the company and wrote in his public blog: "Mark Hotchin and Eric Watson are not bankers, and not the sort of people one would regard as low-risk conservatives." Good one.

"In a letter to the couple in early February, Lee said: "Never did I make your decisions. Not once have I contacted you, or any client seeking to persuade you to invest money in anything. Never have I invested your money for you. You invested your money." Another good one.





Advice and adversity
By ROB STOCK - Sunday Star Times

"It appears to be a collection of investments without any structure, and looks more like something from a DIY investor, rather than one put together by an investment professional."

That's the opinion of senior Spicers' financial planner Jeff Matthews on a portfolio created for retired Southland farmers Clare and John Lindsay on the advice of high-profile Kapiti Coast adviser Chris Lee.

In an assessment paid for by the Lindsays in a bid to get Lee to compensate them for losses, Matthews said: "It is pretty obvious you have a poorly constructed portfolio, which has exposed you to considerable capital loss from investments that should be considered safe.

"A well-constructed bond portfolio should give investors peace of mind and a regular income, and you have neither."

And peace of mind is what the Lindsays say they were after, saying they told Lee when they first contacted him back in 2005 that they considered themselves conservative investors, though they have no written proof of that, and Lee says he does not keep records of clients' risk profiles.

But the Lindsays have been left holding virtually worthless Babcock & Brown subordinated notes, as well as capital notes in St Laurence (in moratorium), debentures in Dorchester Finance (in moratorium), Hanover Capital preference shares (in moratorium), debentures in North South Finance (in moratorium) and two tranches of debentures in Strategic Finance (in moratorium).

The couple said they were private people and asked for the sums involved to be kept confidential, but felt they needed to tell their story because they were infuriated to see Lee continually quoted in the media and criticising others when they feel so badly let down.

"You read his blogs and feel he's a really good guy that is there for the investors, but we feel that is just an illusion," said Clare Lindsay.

Around 60% of their portfolio was in finance companies. Around 30% was in investments with either no rating from a respected international ratings agency, or a rating below investment grade.

Nine of the 18 non-cash investments in their portfolio are in serious trouble, with another bonds in Nufarm trading at a discount to face value.

Missing, noted Matthews, were the large weightings of highly rated, liquid corporate bonds and government stock which would usually underpin a portfolio for conservative investors.

The result has been a big drop in the Lindsays' income.

Lee said that although he sympathised with investors who had lost money, financial markets deteriorated further and faster than anyone forecast. That badly affected and in some cases destroyed reputable organisations that were previously well thought of.

"No financial strategy, other than to buy government stock and use bank deposits only, has been successful," he wrote to the Lindsays earlier this year.

Ad Feedback Clare Lindsay said the couple felt they had been naive. They feel they handed over the management of their retirement nest eggs too casually something they would not have done with the management of their farm.

They have not ruled out legal action, but feel they are not wealthy enough to risk more on a court battle for compensation.

The Lindsays have asked Lee to buy back the investments they say were never suitable for them Hanover Capital preference shares and St Laurence capital notes, both of which are lower ranking than debentures as well as their investments in Strategic Finance, made in late 2007, when they say Lee should have realised there were high risks around the company.

Lee has told the couple he will not do so.

The couple also feel betrayed by Lee's public criticism of companies he had advised them to invest in.

In March 2006 Lee invested the Lindsays' money in Hanover Capital, but in October the next year he withdrew support for the company and wrote in his public blog: "Mark Hotchin and Eric Watson are not bankers, and not the sort of people one would regard as low-risk conservatives."

Lee told the Sunday Star-Times he could understand the criticism, but said his outspoken stances and advice to finance companies had been heeded in cases which had helped preserve the company. He declined to say which firms had been so preserved.

Lee said: "They want to put their side of the story to you, which is their right. It is not something I would do, but I guess it is their choice.

"I won't comment on them individually, but I do accept we are in very stressful times, and that people have every reason to be outraged by losses they have and anyone who has lost 10% of their money would be outraged, but most of the country that have invested money would have lost more.

"The reality is we haven't got everything right, but we have been a little bit more right than wrong."

He estimated that about 12% of $1.2 billion in clients' money was in frozen finance companies, the bulk in Strategic and St Laurence. The outcome for investors in those is uncertain.

The Lindsays say that when they went to Lee in 2005, they thought they were taking on an adviser who would build a portfolio for them. The only difference to other advisers was that they would manage their own paperwork.

Lee said his firm did not work like that. It did offer advice, but as a sharebroker with around 10,000 clients, it did not take responsibility for clients' portfolios. Instead, advice was given when sought on individual securities, and free consultations given on portfolios, Lee said.

"We can't and don't run portfolios for people. We don't charge them fees [Lee is a commission-only adviser] or sit down with people in Auckland."

And at the end of the day, investors were making their own decisions.

In a letter to the couple in early February, Lee said: "Never did I make your decisions. Not once have I contacted you, or any client seeking to persuade you to invest money in anything. Never have I invested your money for you. You invested your money."

Clients are contacted through email alerts, but it is they who pick up the phone and ask whether new issues are suitable for them, or what they should do when an investment they have matures, he said.

In one letter to the Lindsays, Lee does appear to acknowledge that the couple were concerned over risk, saying he believed they expressed their needs as "being above bank rate interest on your capital with as little risk as possible", reflecting their retirement and decision to defer buying a house.

Lee famously offered to compensate clients he had advised to invest in Provincial Finance, which was the first finance company to collapse, back in 2006.

But Lee said that was because he could see that there had been flaws in his researching of the company. It should not be interpreted as an offer to make up for any losses resulting from advice his firm gave, he said.

COLIN
26-09-2009, 08:03 PM
Balance: As I said, Chris Lee does have his critics. But back in 2005/6 there would have been very, very, few financial advisers - if any - who weren't suggesting some or all of the finance companies mentioned in the ST story, to clients who wanted fixed interest investments that paid better than bank deposits, and didn't want anything to do with shares.

Chris Lee was, in fact, one of the first advisers to start raising alarm bells about what was happening at the lower end of the finance company industry, such as Bridgecorp, Capital & Merchant, Lombard, MFS, etc., etc., and he came in for a great deal of personal abuse for his trouble, at a time when the vast majority of the "advisory industry" were acting as if there was nothing to fear.

At the end of the day, people are responsible for their own investment decisions - just as I am responsible for the decision I have made to run with SCF, at the heavily discounted prices at present available. I have been an investor for more decades than I care to count and, although I would not class myself as a "high risk type", I regard myself as having been reasonably successful overall. My portfolio is well spread - indeed quite "balanced!" As I am sure you are fully aware, all investments carry various degrees of risk, even Government Stock. Your nom-de-plume would suggest that you have a more conservative approach to constructing your portfolio - that's fair enough, and everyone should only assume the degree of risk they feel comfortable with. I wish you well (I'm not being sarcastic, believe me) and lets both enjoy the ride.

Balance
27-09-2009, 07:45 AM
Balance: As I said, Chris Lee does have his critics. But back in 2005/6 there would have been very, very, few financial advisers - if any - who weren't suggesting some or all of the finance companies mentioned in the ST story, to clients who wanted fixed interest investments that paid better than bank deposits, and didn't want anything to do with shares.

Chris Lee was, in fact, one of the first advisers to start raising alarm bells about what was happening at the lower end of the finance company industry, such as Bridgecorp, Capital & Merchant, Lombard, MFS, etc., etc., and he came in for a great deal of personal abuse for his trouble, at a time when the vast majority of the "advisory industry" were acting as if there was nothing to fear.

At the end of the day, people are responsible for their own investment decisions - just as I am responsible for the decision I have made to run with SCF, at the heavily discounted prices at present available. I have been an investor for more decades than I care to count and, although I would not class myself as a "high risk type", I regard myself as having been reasonably successful overall. My portfolio is well spread - indeed quite "balanced!" As I am sure you are fully aware, all investments carry various degrees of risk, even Government Stock. Your nom-de-plume would suggest that you have a more conservative approach to constructing your portfolio - that's fair enough, and everyone should only assume the degree of risk they feel comfortable with. I wish you well (I'm not being sarcastic, believe me) and lets both enjoy the ride.

Yes - there were many others who spoke up against the finance companies. Some like Bruce Sheppard told investors to steer clear. Some just don't take the high profile that Chris and Bruce did. They just told investors to avoid finance companies altogether.

Another indication of how well Chris knows the finance companies :

"On January 30, I meet with Mark Hotchin, co-owner of Hanover Finance, to hear of his plans for 2008. This will be a key meeting for me. Hanover has a number of choices to make to maintain its faultless relationship with its debenture and capital note investors, and Hotchin has the power to call the shots.

One important move he is likely to be considering is to strengthen the HFL Board with some banking skills, something that any finance company aspiring to an acceptable credit rating would want to have.

The critics of Hanover focus on its related party lending, its high level of no-cash flow lending, and its focus on short-term deposits.

But to be balanced, they need to acknowledge its continued high levels of profitability, its remarkably low levels of bad debt, and its unblemised record in administering its investment registry."

I rest my case.

winner69
27-09-2009, 09:45 AM
That is very very mean of you Balance -- but funny as

You know that all related party lending is profitable - but only on paper

Balance
27-09-2009, 10:00 AM
That is very very mean of you Balance -- but funny as

You know that all related party lending is profitable - but only on paper

Mean?

Mean is giving advice and then, telling those who pay you a commission that they are responsible for their own investments!!!!!!

Then, rubbing salt into their wounds by bad-mouthing the very same finance companies the poor sods were recommended into putting their funds into - when the finance companies went broke!

COLIN
28-09-2009, 11:45 AM
Mean?

Mean is giving advice and then, telling those who pay you a commission that they are responsible for their own investments!!!!!!

Then, rubbing salt into their wounds by bad-mouthing the very same finance companies the poor sods were recommended into putting their funds into - when the finance companies went broke!

Well, hope you're feeling better after having got that off your chest!

I don't want to give you any further excuse for another vitriolic outburst, but if you are referring to the "Lindsay case" I notice that Lee made it quite clear that he derived NO commission from them - or, it appears, from any others of his clients - and that in fact they arranged all their own investments direct.

Like you, I decry the reprehensible actions of many so-called "financial advisers" who have unconscionably led little old widows and orphans into totally unbalanced portfolios of totally rubbish investments. However, I do not place Chris Lee in that category. In saying that, I must admit that I would never have gone anywhere near the Eric Watson Hanover outfit, and I used to get annoyed at hearing Richard Long on that infuriating advt, but we all make mistakes - perhaps even you, if you could bring yourself to admit it.

Its easy to be a constant knocker - what about sharing a few positive statements about something that takes your fancy, sometime. Don't be shy!

Hope you're having a good day. I am.

Xerof
30-09-2009, 07:29 PM
Well, audited accounts were promised by today at the latest......bonds suffered late accordingly

winner69
30-09-2009, 07:39 PM
Well, audited accounts were promised by today at the latest......bonds suffered late accordingly

Chris Lee says be patient mate .... it'll be OK

http://www.nzx.com/news/markets/2916385/SCF-investor-calls-for-patience

Xerof
30-09-2009, 07:48 PM
OH righto then :):)

Might even ring him for advice

Misc
30-09-2009, 07:52 PM
SCFHA also new lows 28c .. you still hold these 'Winner'??
M

Xerof
30-09-2009, 08:00 PM
IF you believe SCF will come out the other side, the SCFHA's are a stunning buy........

the yield will be over 3 times the annually reset coupon rate, forever.......

winner69
30-09-2009, 08:03 PM
SCFHA also new lows 28c .. you still hold these 'Winner'??
M


Made a few bucks on the first dabble .... but yes still have some

Even the SCF10 things at 28% look interesting as well

Pity the NZ debt market not very liquid ..... could have a lot of fun

Probably good news coming out this week and things will be OK .... of course they will he says

winner69
30-09-2009, 08:05 PM
IF you believe SCF will come out the other side, the SCFHA's are a stunning buy........

the yield will be over 3 times the annually reset coupon rate, forever.......

Always the chance that if there is a major recap and heaps of new money put in they might need to repurchase them .... that'll be good

Xerof
30-09-2009, 08:27 PM
Given the SCFHA's are basically equity, also a possibility they offer a one for one conversion for an IPO as well...current holders would take it I would suggest

whatsup
01-10-2009, 09:53 AM
SCF results looks like a restructuring under way with the help with its financial advisors F Barr, also in discussion with its U S bond holders , these events could cause a drop in the Red pref shares.
When are the interest payments due , are they quarterly, half yearly and how much each payment period?

Contrarian
01-10-2009, 10:34 AM
Gidday

I feel these shares are One Dollar shares, They are preference & get automaticaly adjusted on the same terms as recapitalsation.

"3 times the annually reset coupon rate, forever" currently 9.42 % and they are on sale at 28% of the one dollar face value.

The dividend is paid 3 monthly.

E&oe

winner69
01-10-2009, 11:46 AM
Banks turn off loan facility for Sth Canterbury finance
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10600654&pnum=0


..... and putting things like ".... that there was a "fundamental uncertainty" about South Canterbury Finance's status as a 'going concern'" will give some the ****s

SCFHA might even get cheaper .... now 2550 .... blame the uninformed press doing the good old beat up trick

Dr_Who
01-10-2009, 12:22 PM
Is it game over?

winner69
01-10-2009, 12:31 PM
Is it game over?

Dr -- that's being mischievious - of course it's not all over

SCF too big to fail ... then we would only have Marac left amongst the bigger ones

Dr_Who
01-10-2009, 12:35 PM
Dr -- that's being mischievious - of course it's not all over

SCF too big to fail ... then we would only have Marac left amongst the bigger ones

Too big to fail? Rubbish. Tell that to Lehman Bro etc.

Hands up anyone in this forum would buy SCF shares during the cap raising? Not the Doc. I think NZers have had a guts full of the BS in finance Cos. Related party loans to crap assets. Investors are just making the promoters rich.

They play with our money, they get rich, they laugh all the way to the bank and we suffer. Thats the name of the game.

POSSUM THE CAT
01-10-2009, 12:36 PM
Winner 69 maybe Dr Who is being realistic. Many made similar comments about Strategic, but it went down in a screaming heap

minimoke
01-10-2009, 12:40 PM
Dr -- that's being mischievious - of course it's not all over

SCF too big to fail ... then we would only have Marac left amongst the bigger ones
Marac? - thats the one with the BB+ junk debt rating isn't it

winner69
01-10-2009, 12:57 PM
......... Related party loans to crap assets. Investors are just making the promoters rich

They play with our money, they get rich, they laugh all the way to the bank and we suffer. Thats the name of the game.

Talking about related party loans

From the Herald 'SCF's impaired and past-due loans rose to NZ$445.9 million or 26 per cent of total gross loans by the end of June, up from NZ$85.2 million or 6 per cent a year earlier' ..... holy **** ..... 26 of the loans are overdue

BUT SCF said no related party loans had been written off or forgiven during the year.

The meassage of course is that the related party loans are the good part of loan book .... yeah right

Dr_Who
01-10-2009, 12:59 PM
Watch those magicians play their tricks and hypnotize the Mums and Dads into a story straight out of the Alice and Wonderland.

Lets all have a tea party, shall we?

Misc
01-10-2009, 04:00 PM
What ever happened to the 'Alan will underwrite the Bad Loans' promise of July?? Perhaps $445m a tad beyond the old beggar? What a shambles ,,, cant for the life of me see how the Govt would or should honour the GG as it appears almost certain that the real state of the loan book at SCF was very different to what has been reported , for a very long time (note last years profit figure being 'amended'). M

kura
01-10-2009, 06:33 PM
Please excuse my ignorance, but is SCF listed ? or just it's bonds ?

whatsup
01-10-2009, 06:58 PM
Please excuse my ignorance, but is SCF listed ? or just it's bonds ?
TRY SCFHA on the NZX.

winner69
01-10-2009, 07:20 PM
Read the comments at the end of this article
http://www.nbr.co.nz/article/south-canterbury-finance-audited-accounts-reveal-breach-112177

Heavy redemptions coming up ... people not renewing / rolling over existing things .... even with a government guarantee

minimoke
02-10-2009, 09:03 AM
Heavy redemptions coming up ... people not renewing / rolling over existing things .... even with a government guarantee
The red flags are certainly flapping hard in a gale now. We only have to look back on past finance company collapses to see the same things recurring.
- inter party transactions
- iffy loan book
- late audited accounts
- breach of covenants
- fronted by a person who is giving an illusion of integrity
- preliminary results inconsistent with final results.

Fair value adjustments smell of cooking the books to me. Fair value should have been well understood by a company of this stature a few months ago. Nothing should have changed in their interpretation of fair value to create a difference between the preliminary and final reults.

Steve
02-10-2009, 06:25 PM
The Dunedin office has been closed down.

That's the one that has advertised property investments (which they had financed and word on the street said the developer was in difficulty), boats & farm bikes in the window over the last year or so...

A saving on the main street rent, I guess?

Balance
06-10-2009, 11:04 PM
The yield on the listed bonds are blowing out big time. Market obviously does not buy into recapitalisation or safety of government guarantee?

How good is the government guarantee? Can it be void if SCF has not fully fulfilled its obligations?

There are some sweating it out there - Forbar who has single-handedly pumped in tens of millions into SCF and Chris Lee who waxed lyrical about the greatness of Hubbard and his undoubted integrity.

Turns out SCF is managed more or less like most of the other finance companies - plenty of property loans and related party transactions (last count $230m?).

QOH
07-10-2009, 01:00 PM
Sweating here too, but decided it's too late to get out, will just hang in and hope if they go under, there will be something left for the debenture holders. It's a hard choice to make.

upside_umop
07-10-2009, 01:48 PM
The yield on the listed bonds are blowing out big time. Market obviously does not buy into recapitalisation or safety of government guarantee?

How good is the government guarantee? Can it be void if SCF has not fully fulfilled its obligations?



The government guarantee is fine. Its just that it runs out 12/10/2010. To participate in the extended scheme (http://www.beehive.govt.nz/release/government+extend+retail+deposit+guarantee), you need a credit rating of at least a "BB" and have to pay a cool 150 basis points on deposits. If a finance companies' bonds are maturing after this date, then they need to have a rating to have the them covered by the govt guarantee.

So the question is, will SCF gain a credit rating? At the moment, the market is pricing in....well...a yield to maturity of:

~30% for their 15/1/2012 bonds.
~20% for their 15/06/2011 bonds.

The shorter maturity bonds within the current government guarantee scheme has them trading at a more normal yield, because they are covered.

~7.50% for their 10/08/2012 bonds.

Hope that helps clarify a few points Balance.

Balance
07-10-2009, 01:53 PM
Sweating here too, but decided it's too late to get out, will just hang in and hope if they go under, there will be something left for the debenture holders. It's a hard choice to make.

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

Amazing the company is not coming out and saying something.

MrDevine
07-10-2009, 02:46 PM
I'm tempted at that sort of yield. Can ol'hubbard bail this out? Can't believe they got up to the related party lending as all the other outfits, really!? Hubbard has been around and around again, surely he'll find a solution to this?

minimoke
07-10-2009, 03:53 PM
I'm tempted at that sort of yield. Can ol'hubbard bail this out? Can't believe they got up to the related party lending as all the other outfits, really!? Hubbard has been around and around again, surely he'll find a solution to this?
Hubbard is retiring so there shoudl be more interst in the sucession plan. Its the skills of those coming in behind him which investors should be looking at.

Balance
14-10-2009, 07:12 AM
I'm tempted at that sort of yield. Can ol'hubbard bail this out? Can't believe they got up to the related party lending as all the other outfits, really!? Hubbard has been around and around again, surely he'll find a solution to this?

How will he find a solution? In the end, Hubbard is no different from the other finance company owners - SCF grew too fast and then, he used SCF to finance his own businesses.

This is where SCF and Hubbard has got caught.

Xerof
14-10-2009, 07:28 AM
Seems Chris Lee is now the mouthpiece for SCF - whats wrong Lauchie, cat got your tongue?

more delays, softened by purring "imaginary" facts from a third party

http://www.stuff.co.nz/business/market-data/2962077/Sth-Canterbury-Finance-looks-likely-to-pay-back-US-private-investors

I think they come out the other side personally, but patience is required..... and being tested

Dr_Who
14-10-2009, 07:31 AM
Hands up who here will participate in SCF cap raising. :eek:

Balance
14-10-2009, 07:45 AM
Seems Chris Lee is now the mouthpiece for SCF - whats wrong Lauchie, cat got your tongue?

more delays, softened by purring "imaginary" facts from a third party

http://www.stuff.co.nz/business/market-data/2962077/Sth-Canterbury-Finance-looks-likely-to-pay-back-US-private-investors

I think they come out the other side personally, but patience is required..... and being tested

Chris Lee has investors in SCF - probably so many that he wants SCF to succeed. Market unfortunately is saying something else.

Xerof
14-10-2009, 08:07 AM
Name any broker who hasn't got clients into SCF....their bond offers were snapped up, and their roll-over % rate and new funds % held up very well right through last year/early this year

Balance
14-10-2009, 08:20 AM
Name any broker who hasn't got clients into SCF....their bond offers were snapped up, and their roll-over % rate and new funds % held up very well right through last year/early this year

Question of quantum - Chris Lee's clients are probably in much deeper than other brokers, save Forsyth Barr.

minimoke
14-10-2009, 03:53 PM
Seems Chris Lee is now the mouthpiece for SCF - whats wrong Lauchie, cat got your tongue?

more delays, softened by purring "imaginary" facts from a third party

http://www.stuff.co.nz/business/market-data/2962077/Sth-Canterbury-Finance-looks-likely-to-pay-back-US-private-investors

I think they come out the other side personally, but patience is required..... and being tested
I'm getting a bit confused (not hard some would say!). I thought it was the Americans who were reviewing their funding support - not that SCF was looking at extricating itself from this facilty. And where will SCF get the $137m from?

temuk
14-10-2009, 05:54 PM
I know the exchange rate is good and would be a good time to pay back the yanks but
with preference share at 24cents wouldn't it be better buying them back?

A. is it ethical?

B. what a hell of a deal, wipe a $1 of debt for a mere 24 cents and on top they won't
have to pay the 5.61% divy.

Xerof
14-10-2009, 06:54 PM
Yes it's ethical - just needs a Directors resolution to approve purchases and declaring them as they go.

Infratil are already doing this with IFTHA's - reason for purchase - "in the best interests of the Company and shareholders"

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

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

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

Lee's comments, as I said earlier, are softening, twisting and purring on behalf of SCF, IMO

upside_umop
14-10-2009, 07:36 PM
The government guarantee is fine. Its just that it runs out 12/10/2010. To participate in the extended scheme (http://www.beehive.govt.nz/release/government+extend+retail+deposit+guarantee), you need a credit rating of at least a "BB" and have to pay a cool 150 basis points on deposits. If a finance companies' bonds are maturing after this date, then they need to have a rating to have the them covered by the govt guarantee.

So the question is, will SCF gain a credit rating? At the moment, the market is pricing in....well...a yield to maturity of:

~30% for their 15/1/2012 bonds.
~20% for their 15/06/2011 bonds.

The shorter maturity bonds within the current government guarantee scheme has them trading at a more normal yield, because they are covered.

~7.50% for their 10/08/2012 bonds.

Hope that helps clarify a few points Balance.

Thought I'd repost this for you Balance, since you may have missed it?