South Canterbury Finance Limited

[minimoke]

The challenge is not capital; it is not margin; the challenge is cash flow.

while not loosing sight of the 31 August requirement for new equity to remedy the beach of the Trust Deed.
Theres also S&P who reckon if investor support weakens (which it appears to have done over the past few weeks) then the credit rating is likely to fall again though that may be tempered by the cash balance

[Beagle]

"So if we assume Chris Lee has based this analysis on something tangible then it would appear say that if the remaining roll-over rate was reduced by say half from the normal level that SM alludes too of 40-60% then that's a roll-over rate of 20-30 %for that $380 million say about 100 million and there's new funds required of about $280 million in the next three months". Roger

"This is gibberish". Enumerate

How so ? The remaining investors through to 12 October have allready declined an enhanced interest rate offer to extend their investment with the extended Govt guarantee, so I think its reasonable to assume that at many of them want their money back for one reason or another.
By simple extrapolation is reasonable to conclude that the actual roll-over rate to be experienced with this "stubborn bunch" is likely to be materially lower than historical normal roll-over rates 40--60%.

[Enumerate]

while not loosing sight of the 31 August requirement for new equity to remedy the beach of the Trust Deed.

While new equity could remedy the Trust Deed breach - it is a sufficient, but not a necessary requirement. The primary remedies are a restructure involving the equity assets.

You clearly do not understand the current state of the Trust Deed, nor do you understand the initiatives underway to heal the breaches. This is basic stuff - if you want to understand the goals of the restructure.

Theres also S&P who reckon if investor support weakens (which it appears to have done over the past few weeks) then the credit rating is likely to fall again though that may be tempered by the cash balance

Have you actually read the credit report? Do you know what the primary reason was for the credit downgrade?

[Beagle]

while not loosing sight of the 31 August requirement for new equity to remedy the beach of the Trust Deed.
Theres also S&P who reckon if investor support weakens (which it appears to have done over the past few weeks) then the credit rating is likely to fall again though that may be tempered by the cash balance

I can't help wonder what the current cash balance is and notice Sandy has been very quiet about that !!

"We can repay maturing investors for now" Sandy Maier

[Enumerate]

How so ?

Your assumption is that the gap between the total amount due and October and the amount that has been pledged to rollover needs to be met from new cash inflows from debenture debt.

This is clearly not the case when SCF have demonstrated very significant recoveries from the non-strategic loan book. Furthermore, there are likely to be significant cash flow from a number of non-stated areas. They have not revealed any information about maturities in the strategic loan book - have not revealed any information on cash freed from the restructure activities concerning related parties - have not detailed cashflow from ongoing operational activities - have not detailed potential cashflow from restructuring activities on the strategic loan book - have not noted any potential bridging loan finance like an extension to the existing Torchlight facility.

Keep in mind - SCF is about a high quality loan book - downsizing. The dubious property loans were only 15.8% of the total receivables. This is not even remotely a Hanover situation.

It would ideal if SCF could overcome the "wall of debt" with the inflow of public debenture money. The surprising fact is that if SCF could actually get over the "hump", solely with public debenture money - they would not have to downsize the business. They could actually grow!

Actually, it would seem they are surprisingly close to achieving this. However, they are not starved of significant cashflows available from existing operational restructure.

That is why, I suppose, they appointed a new manager with this responsibility.

I assume he will be doing more than opening the envelopes coming in from public subscribers and totaling the amounts.

[Beagle]

Okay I'll give you that point to a degree but suspect the low hanging fruit in terms of recoveries averaging $40m per month has allready been picked. Whether they can maintain that over the next few months will be interesting as will Torchlight's potential further involvement.

10 cents maybe, but 15, no thanks.

[Enumerate]

I can't help wonder what the current cash balance is and notice Sandy has been very quiet about that !!

1) For now, he is managing his business to be in compliance with the covenants of the Trust Deed.

2) When he gets over the "wall of debt", he will be managing his business to meet the capital adequacy statutory requirements.

3) When he has has completed this phase of the restructure he will move to boost margin.

4) Margin increase will follow with a credit rating increase.

5) Credit rating increase will allow organic growth of the loan receivables.

6) The combination of margin increase and asset growth will lead to profit growth.

This is a 2 -3 year process. At the end of this process the SCFHA holders will be toasting Sandy Maier.

There is no point, in this process, that Sandy Maier is managing this business to increase his cash balance. Given this, why would he report it?

[Enumerate]

10 cents maybe, but 15, no thanks.

Once the "wall of debt" is behind them ... 15cents for an SCFHA will look damned cheap.

He will only have about $50million to raise during the an entire year! Clearly, he will need to focus on beyond 2011 debt maturities - but his focus will be on restoring the basic SCF business to an acceptable level of profitability.

He will face the post 2011 maturities with a better Credit Rating, a better profit story, a sound and easily demonstrated capital adequacy story, much more favourable market dynamics (given the number of competitor failures) ...

SCFHA's post October ... much higher than 15cents.

[Beagle]

"There is no point, in this process, that Sandy Maier is managing this business to increase his cash balance. Given this, why would he report it"? Enumerate

I will certainly conceed he appears to be holding up well under pressure and has no legal obligation to disclose the current cash position to the public at this point but with the SM and investors apparent reaction, how long before we hear from S & P again ?

[Beagle]

He will face the post 2011 maturities with a better Credit Rating, a better profit story, a sound and easily demonstrated capital adequacy story, much more favourable market dynamics (given the number of competitor failures) ... Enumerate

Much depends on the state of the economy and how it affets on-going levels of loan deliquencies. I'm in the double dip camp and think there will be plenty of new deliquencies this current financial year as well as further provisioning required on existing doubtful receiveables. I think the liklihood of SCF making a profit for the year ended 30 June 2011 is extremly slim, assuming they last that long.