South Canterbury Finance Limited

[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.

There are two aspects to this ...

Either:

If the economy improves, interest rates will rise ... there will be pressure on SCF margins.

Or:

If the economy dips, interest rates will not rise, but defaults in the receivables will rise.

If I were Sandy Maier, out of the two, I'd actually prefer to face the second issue, rather than the first. The basic reason is that I will not be seeking to grow my loan book until the very end of the restructure process. He is not looking to chase new business and he has already had a good hard look at the business he already has. If he can stay static, in business size, during a "dip" - this buys him time to complete the capital adequacy restructure. An interest rate rise takes time away from him.

[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 ?

I think he is doing brilliantly. He is obviously a master of the psychological aspects of this process and is probably a formidable negotiator. He hasn't put a foot wrong in terms of expectation setting, he carefully controls the "information asymmetry". He has been dealt a number of setbacks - but he is rock solid no matter how heavy the punch.

Very impressive.

I could go on to say that he is every bit a CEO that Allan Hubbard deserves ... but I won't spoil the mood :-)

[Beagle]

I think he is doing brilliantly. He is obviously a master of the psychological aspects of this process and is probably a formidable negotiator. He hasn't put a foot wrong in terms of expectation setting, he carefully controls the "information asymmetry". He has been dealt a number of setbacks - but he is rock solid no matter how heavy the punch.

Very impressive.

I could go on to say that he is every bit a CEO that Allan Hubbard deserves ... but I won't spoil the mood :-)

Yeah, there's little doubt Lachie left quite an impression on SCF books. Look, lets see where we find common ground.

1. There's no question about the skills and credibility of the Directors that have been appointed and the new management also appear to be quite a "win" for SCF.

2. Sandy is doing the best job in extremly difficult circumstances, I have little doubt any on here would disagree with that.

Where we digress in the main is this. The creative accounting practices are the main area of concern I have. $109m being held as a tax asset requires future earnings of $389.28 million at the new forthcoming 28 cent corporate tax rate to vindicate its existence. There's little doubt in my mind that this is the single most creative accounting entry I've ever seen in 30 years of accountancy.

3. There's no question that AH has done a world of good in the wider N.Z. community over a lifetimes work.

But no one is above the law and there's no question at least some of the 408 investors deserved to see a prospectus and investment statement and have the protection of a trustee, so from my experience of being on the receiving end of one of those situations, real serious harm is being done and probably will be done to some investors in Aorangi when recoveries, especially those poorly or not secured ar'nt realised at face value.

I think that pretty much sums up the area's of agreement and otherwise.

[Enumerate]

Where we digress in the main is this. The creative accounting practices are the main area of concern I have. $109m being held as a tax asset requires future earnings of $389.28 million at the new forthcoming 28 cent corporate tax rate to vindicate its existence. There's little doubt in my mind that this is the single most creative accounting entry I've ever seen in 30 years of accountancy.

I have made the point before, but I will repeat ...

The $109m tax "assets" are $27m pre paid tax and $83m deferred tax. (Remember that the prepaid amount is a tax overpayment following the corrections to the 2009 full year accounts).

This is ugly, I agree - but it is in the half year accounts and I believe, with some optimism required to fully justify my position, that this reflects some uncertainty about the impairment provisions. I reckon we will see something of the order of $83m written back, at fully year, as recoveries above the impairments detailed at half year are demonstrated to be ~$250m.

Bottom line is I think we will seem a much sounder view on this once we have the full year accounts.

[Enumerate]

But no one is above the law and there's no question at least some of the 408 investors deserved to see a prospectus and investment statement and have the protection of a trustee, so from my experience of being on the receiving end of one of those situations, real serious harm is being done and probably will be done to some investors in Aorangi when recoveries, especially those poorly or not secured ar'nt realised at face value.

This is a matter between Allan Hubbard and his investors. Maybe a little bit of Companies Office prodding was ignored by AH - but the reaction of Statutory Management is a significant over reaction.

[Beagle]

"This is ugly, I agree - but it is in the half year accounts and I believe, with some optimism required to fully justify my position, that this reflects some uncertainty about the impairment provisions. I reckon we will see something of the order of $83m written back, at fully year, as recoveries above the impairments detailed at half year are demonstrated to be ~$250m". Enumerate

Sorry, I can't recall anything Sandy's said that would support your viewpoint. To the best of my knowledge he's only said that recoveries actually received are in line with the written down values, or words to that effect. To suggest that there's going to be a positive revlauation of previously provisioned doubtful receiveables yet to be recovered is more that a little optimistic, so we'll have to agree to disagree on that.

From where I see the economy, there's plenty of pain being felt out there, most especially by entities in a position where they're highly leveraged.
In my oipinion what tepid theoretical recovery might be stuttering along is based primarily on the potential for an improved outlook in the rural sector and frankly I can't see any of that filtering through into the bigger cities for quite some time to come.

We are such a small blip on the world economic radar we're almost entirely at the mercy of overseas events so what may happen in Europe with their banking system or any other major economic influence such as China or Amercia probably dictates to a large extent the double dip scenario or otherwise.

In my opinion one of the primary drivers behind extremly conservative comsumer consumption going forward is the extremly high levels of embedded debt all around the globe. Consumers arn't going to come back and start spending because either they can't, they don't have access to credit lines due to reluctant lending by the banks, or worse, those like us with a bit of discretionary capital are too scared to deploy it in non-productive area's.

I'd quite like to spend some money on a new release boat that looks quite good, see www.greenline33.com but frankly I'm too scared and at this point would rather leave the money in KIPGC earning a tidy 8.95% almost risk free.

Why did I go on this late afternoon Friday rant, oh yes, double dip, strap yourselves in, this GFC aint going to be over anytime soon in my opinion.

[winner69]

One News had Allan and Jean on tonight .... at home doing what they do best .... keeping the journals and cash books up to date .... and yep Jean was using a pen but the books looked immaculate

But i thought the Stat Man had all the books .... or has Jean a funds management business on the side as well that the Stat Man hasn't caught on yo

Didn't see the cat ... hope he's coping

[Enumerate]

So, the Hubbards are calling for a Royal Commission of Inquiry, not a Judicial Review

http://tvnz.co.nz/business-news/alla...-3648920/video

In law, a Royal Commission is appointed by and responsible to the Crown and not the Governor-General in Council, and it can investigate anything (except for the purpose of determining whether or not a person has committed a crime).

From the Cabinet Manual: "Judicial review" is the review by a judge of the High Court of any exercise of, or non-exercise of, a decision-making power in order to determine whether or not the decision was lawful or valid.

The Royal Commission of Inquiry is a better choice ... it can have a wider terms of reference and would not simply focus on the "process" of the decision making. Also, the report goes to the Crown - not to the Governor-General in Council - it is a step up from the Cabinet and, I presume, would allow inspection of the Cabinet decision making process.

Good on ya Allan.

Time for everyone to write their MP. I think it is important to stir up a bit of noise - at the grass roots electorate level - that New Zealanders will not stand for this issue to be swept under the carpet. This is important - it is a practical step everyone can take to help Allan Hubbard.

[Balance]

So, the Hubbards are calling for a Royal Commission of Inquiry, not a Judicial Review

http://tvnz.co.nz/business-news/alla...-3648920/video

In law, a Royal Commission is appointed by and responsible to the Crown and not the Governor-General in Council, and it can investigate anything (except for the purpose of determining whether or not a person has committed a crime).

From the Cabinet Manual: "Judicial review" is the review by a judge of the High Court of any exercise of, or non-exercise of, a decision-making power in order to determine whether or not the decision was lawful or valid.

The Royal Commission of Inquiry is a better choice ... it can have a wider terms of reference and would not simply focus on the "process" of the decision making. Also, the report goes to the Crown - not to the Governor-General in Council - it is a step up from the Cabinet and, I presume, would allow inspection of the Cabinet decision making process.

Good on ya Allan.

Time for everyone to write their MP. I think it is important to still up a bit of noise - at the grass roots electorate level - that New Zealanders will not stand for this issue to be swept under the carpet. This is important - it is a practical step everyone can take to help Allan Hubbard.

For putting hundreds of millions of taxpayers money at risk, YEAH RIGHT.

[temuk]

One News had Allan and Jean on tonight .... at home doing what they do best .... keeping the journals and cash books up to date .... and yep Jean was using a pen but the books looked immaculate

But i thought the Stat Man had all the books .... or has Jean a funds management business on the side as well that the Stat Man hasn't caught on yo

Didn't see the cat ... hope he's coping

From what I have been told, I would find it hard to believe they would have all the books for Aorangi and all 7 trusts in the office
in George st.
This is propably the book the Stat Mgr is looking for!