South Canterbury Finance Limited

[Phaedrus]

"How many angles can fit on the head of a pin"?

Three hundred and sixty.

[minimoke]

I "how many angles can fit on the head of a pin"?

No angles, 12 angels and one cat.

[Enumerate]

Three hundred and sixty.

Lol - fair enough

[Beagle]

It looks like the continual SCF dirge of doom is continuing on the thread.

Have any of you actually done any work trying to estimate the feasibility of SCF overcoming the "wall of debt"? Can you estimate how much it is? What are the monthly cash inflows required to meet this refinancing obligation?

No, I suppose it is much easier to imagine that SCF has failed and to debate the equivalent of "how many angles can fit on the head of a pin"?

Do you guys actually invest in anything? Or, are you simply happy to follow the herd?

Your never happy are you Enumerate. Here I am suggesting it may be in the national interest for the Govt to bail out SCF with a significant cash injection, only if necessary, and you're still grumpy.

[Beagle]

Roger, the difference with other finance companies is one of scale.

A collapse of the SCF/Hubbard empire would be a Lehman like event for NZ. Perhaps not that much money would end up being lost but due to the byzantine structures, sheer number of parties involved and poor record keeping, thousands of businesses and investors would not know where they stand for months or even years. Those businesses and investors would thus become very conservative very quickly and you would have a systemic event for the NZ economy leading to a recession.

I agree with that, its a scary prognosis.

[Enumerate]

Your never happy are you Enumerate. Here I am suggesting it may be in the national interest for the Govt to bail out SCF with a significant cash injection, only if necessary, and you're still grumpy.

SCF does not need an equity injection. It simply needs to extend the maturity profile of its debt reflecting the short term "wall of debt" bump later this year and the medium term downsizing of the loan book.

This can all be achieved using existing levels of equity.

A secondary factor is the restructuring of equity from equity assets to tier-1 capital.

It strikes me that the government has already demonstrated their use of standover tactics. First, they force registration under the retail deposit guarantee scheme (read the Standard & Poors credit reports if you object to this asssessment). Second, they cause significant harm to the SCF ability to raise domestic debenture funds and they cause direct harm to the credit rating through the statutory management of Allan Hubbard.

Now you are suggesting they become an equity partner in SCF, based on some risk weighted discount I presume. Given the risks and problems have been caused by the government, to a large degree, this would strike me as standover tactics.

Perhaps that is how some players work, in the Viaduct. It is not a good look for a government.

[minimoke]

Second, they cause significant harm to the SCF ability to raise domestic debenture funds .

Perhasp thsi is being overstated. In todays news Sandy Maier says "Allan's statutory management has hurt but there are so many other variables involved," he said when questioned about the effects of the statutory manager's report which criticised Hubbard, the financier's largest shareholder.

"There's been nothing catastrophic but it has gotten more difficult," Maier said, referring to general economic conditions and difficulties raising money and getting investors to renew.

[Balance]

SCF does not need an equity injection. It simply needs to extend the maturity profile of its debt reflecting the short term "wall of debt" bump later this year and the medium term downsizing of the loan book.

This can all be achieved using existing levels of equity.

A secondary factor is the restructuring of equity from equity assets to tier-1 capital.

It strikes me that the government has already demonstrated their use of standover tactics. First, they force registration under the retail deposit guarantee scheme (read the Standard & Poors credit reports if you object to this asssessment). Second, they cause significant harm to the SCF ability to raise domestic debenture funds and they cause direct harm to the credit rating through the statutory management of Allan Hubbard.

Now you are suggesting they become an equity partner in SCF, based on some risk weighted discount I presume. Given the risks and problems have been caused by the government, to a large degree, this would strike me as standover tactics.

Perhaps that is how some players work, in the Viaduct. It is not a good look for a government.

Any number of people have done proper balance sheet and risk-adjusted capital requirement calculations on SCF. Where is yours?

[Enumerate]

Any number of people have done proper balance sheet and risk-adjusted capital requirement calculations on SCF. Where is yours?

From a balance sheet perspective, even a "retail novice" can be satisfied that the basic levels of equity are already in place (mainly as equity assets - not as tier 1, but this will sort itself out over time).

Reading SCF accounts is actually straight forward. If you compare this to Macquarie, for example, it is childs play. Macquarie accounts, with the twists and turns - it is surprising anyone believes they understand them.

Back to SCF. It is also fascinating and rewarding to understand the impairment mechanisms. Would you impair a solid loan receivable at 9% because market rates should be higher? The nervous schoolgirls over at interest.co.nz seem to believe this is a cash impairment! Various Lost Souls believe this loan should probably carry a weighted risk rating of 350% for capital adequacy rules.

Back on this SCF thread no one else posts anything quantitative at even a balance sheet level - so you expect me to?!?

The real interesting bit is the Income Statement analysis. What hope is there of intelligent, informed discussion here - when we can't even get past a pro forma balance sheet?

I have detailed my conclusions and posed a number of questions that I was hoping would lead to informed discussion on SCF financials. No one has responded. Further, I have no intention to "file a report" when the full year accounts will set a new datum (these are due in about one month).

There are other basic questions to ask. Why is it that so many Aucklanders, with no financial exposure to SCF are so terribly interested that every aspect of this company be portrayed in the worst possible light? Why are there so few people willing to declare their interest? I am just a humble psychic tea leaf reader ... with a few SCFHA ... I don't have significant financial connection in the South Island ... I am not a Viaduct "player" ... I find these things difficult to understand.

[Beagle]

"SCF does not need an equity injection. It simply needs to extend the maturity profile of its debt reflecting the short term "wall of debt" bump later this year and the medium term downsizing of the loan book". Enumerate

YEAH RIGHT. As mentioned by many commentators they're carrying many dubious items on their balance sheet, the worst of which is the aforementioned tax losses which they're stating has a net present value of over $100 million dollars, when I think its clear to almost everyone on "this planet" that there's no credibility whatsoever to this balance sheet assertion as there's no chance whatsoever of the company being profitable in the forseeable future.

You are in "denial", and that's putting it as kindly as possible, I believe there's a widespread understanding within the professional financial community that SCF needs a significant capital injection, but what would all those professional commentators and professionals know right ?

There no way there's a further single cent to write-down on the deliquent loan book of $500m since 1 January 2010 right ? and there's no possibility that there's any further new loan deliquencies and provisioning required since 1 January 2010 ?

I worked out you can't be a lawyer, I think that's abundently clear, they have professional training and an understanding of realistic outcomes.

That you have a financial interest in SCF and are a big supporter of AH is abundently clear but its clearly clouding your judgement. BTW I have no idea what your statements regarding the Viaduct refer too, perhaps that's south island slang for a central Auckland JAFA ?