South Canterbury Finance Limited

[winner69]

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]

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]

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/SCFH...ements/4712504

Misc

[winner69]

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/SCFH...ements/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]

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]

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]

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]

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]

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]

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.