SCF Given BB Rating by S&P - 2 Mar 2010
Well, since it is highly unlikely that [Un]Balance[d] will post this, I'd better do it:
http://www.interest.co.nz/ratesblog/index.php/2010/03/02/south-canterbury-downgraded-to-bb-may-be-cut-below-guarantee-threshold-within-3-months/
Positive: It meets the requirements of the Extended Guarantee Scheme
Negative: It is a downgrade from BB+ and is on creditwatch negative with a potential downgrade in the next period
See now - its not so hard to be objective is it?
Alan.
SCF - Liquidity Crunch - Oct 2010
This is my simple analysis of the current situation with respect to SCF:
Basically, they need around $1b in cash by mid Oct 2010 when the govt guarantee runs out.
That appears to be roughly the amount that is maturing from debentures between now and then, heavily weighted in the week the guarantee runs out.
So, if they have outstanding loans maturing between now and then of about $1b AND if those loans are substantially repaid in full, AND if they don't re-lend it (or lend it very short and secure), then SCF will be fine irrespective of whether the EGS is approved.
If they don't then they have to raise the funds elsewhere by:
1) Borrowing materially past Oct 2010 (I think we can rule out retail deposits for the most part here, so we are talking about wholesale borrowing).
2) Selling 'non core' assets (e.g. HNZ or Scales) or selling off some of the loan book.
3) Capital raising (equity)
4) Debt for equity swap with another stressed finance company
Number (1) looks very difficult without incurring very high interest costs, which would push the medium to longer term position further downhill - not impossible by any means though.
Number (2) has to be on the agenda and I think they'll be pursuing that as fast as possible.
Number (3) is on the agenda too as they have already said. Difficult in the current market, but if Hubbard is willing to 'lose' substantial amounts of his investment, and I think he has clearly demonstrated already that he is, then this could work quite well.
Number (4) would improve the equity position of SCF and improve cash flow by whatever amount(s) they could recover from the additional loan book between now and Oct 2010, but I think that the debenture holders in the third party finance company would not go for it having seen what they believe to be a bad deal from Allied Finance (naively perhaps, but it is perceptions that count).
If they can't do any of the above (or all / some of them in combination), then everyone except the debenture holders are looking at almost total wipeout come Oct 2010.
Apologies if this has been asked before, but does anyone know if the bondholders are covered by the govt guarantee scheme? I assume not, in which case they would likely lose eveything too, but they may be?
Please update with any more specific numbers if you have them.
Thanks,
Alan.