Disagree with you.
Madoff, sub-prime, Worldcom, Lehman Bros etc are indicative of how bad investors are in the US.
NZ is no worse and no better.
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I suspect that if you pick them up at 15c you'll spend some time hoping that the Receivers will leave you 20c.
Having said that, the SCFHA's seem prone to (over)reacting to any good news, so maybe you have the chance of one or two more turns on the merry-go-round ! ? !
That wouldn't be too bad, but I think that if the receivers are in, the SCFHAs will get nothing at all.
They are a yield gamble - at 15c, IF the interest keeps flowing, and IF the 1 yr swap rate doesn't change much come 1 Oct 2010 and 1 Oct 2011, then you'd get all your money back including cost of funds in about 3 yrs.
Lots of 'ifs' there though, so I would only put money into the SCFHAs that I was prepared to lose completely - a very small section of your portfolio!
Agreed - hence my comment above that they can be a fun ride as long as you get in and out and lock in gains. I could put a few thousand in them now, lose the lot, and still be 'up' overall from dealing in SCFHAs, but that doesn't mean I want to lose a few thousand from this point!
Alan.
Alan, you may have to dust off your chequebook if this keeps up !
Don't forget, though, the interest is taxable but if they tip over then the loss can't be claimed. If they're at 15 cents then the payback period would be about 27 months (assuming 33% tax rate).
It would be logical for the company to suspend interest payments on the SCFHAs. Remember, this is a suspension - there is no accrual of interest payments - the perpetuals can pay out nothing ... perpetually.
Maybe word is getting about that this is more than an improbable event - more like a certainty if there is no short term progress on recapitalisation.
Remember also, the prognosis for the prefs, if the worst happens, is not that good. The prefs are considered equity - both pref and equity holders would be likely to be wiped out.
Do you really think that in the recapitalisation process that the pref holders will be treated any differently from equity holders ... I don't think so.
Face facts - SCF is a zombie finance company. The government is underwriting this mess. Just look to Telecom to see how well "bad boys" get treated.
Article in the NZ Herald today - very critical of the whole govt guarantee scheme:
http://www.nzherald.co.nz/news/print...ectid=10638903
They should have jumped up and down when Cullen introduced it, but didn't want to criticise him for anything at all with an election coming up I suppose - not that it helped them.
Alan.
This sends a chill down my spine. Add one more nail to the coffin.Quote:
Originally Posted by SCF Prospectus page 14
Another observation is that it is highly likely that the toxic effect of all the related party loans has yet to be dealt with. For example, the Kelt Finance and Dairy Holdings subsidiaries are not part of the charging group. It is not clear if appropriate provision for writedowns have occured for these units. There are about $220million in related party loans that could turn into a significantly stinky toxic mess.
In effect, SCF is our very own South Island Ponzi scheme.