South Canterbury Finance Limited

[minimoke]

From an economic development perspective - survival and reestablishment of SCF in the rural/regional commercial space does make a compelling argument. The Herald ran a very interesting and detailed story on this ... this must be more substantial than idle rumour.
.

Yes - Agreed this is an interesting thing to look at.

At the moment it appears that new money flowing into SCF is being used to pay off the wall of maturities" so it seems SCF probably aren't contributing , in a meaningful way to the new development of an economic south.

If we put all the AH, SCF, Sandy, Stat Man noise aside a moment we have a finance company with a C negative watch rating a person with money looking for a safe deposit haven might be well advised to look at finance companies other than SCF. Even if, say, today the Stat Man pulls out and there are no investigations / charges against AH; if Sandy announces a $700m equity injection; if someone buys the "bad loan" book, if every thing turns rosy, its going to take a while to lift that Credit Rating so depositors would still be taking a punt based on hope rather than track record if they choose to deposit with SCF.

If SCF do default what happens. Well clearly all depositors get their money - so no loss their. They can then take their loot and deposit it with someone who can make economic use of the cash. All borrowers still have their loans - so no immediate impact there so they can keep on running their business for a time. Someone will walk into SCF (possibly Sandy since he knows the business and has experience of Stat mans and receiverships) on behalf of the government and will be asked to extract as much value as possible from the business to refund the tax payer. The good loan book will be sold so all is well there. The bad book will get written off, Helicopter and scales will get sold at market value so business as usual there. The major loosers will be holders of SCFHA etc as there may not be enough in the pot to repay them.

If SCGHA holders don't get there money back should we have sympathy - from an economic development perspective. No. They would have perhaps been well advised to sell, take their loss and place the left over funds into a company that can make better use of them from an economic perspective. At the moment the only people benefiting from SCFHA are the punters and speculators who are playing the market rather than adding economic value.


Oh well, if Chris Lee is to be believed we'll know the Govts news today.

[Enumerate]

At the moment it appears that new money flowing into SCF is being used to pay off the wall of maturities" so it seems SCF probably aren't contributing , in a meaningful way to the new development of an economic south.

With a $1billion loan book - I am not sure their effective contribution is insignificant.

SCF are down sizing (from about $1.9b to about $1b). This will put pressure on business development - the difference between these two amounts is no longer available to fund productive enterprise. However, imagine if SCF were to collapse - the loss of the remaining $1b would be crippling. SCF have made very tidy profits on their historical core lending - an orderly return to this state creates no losers - a disorderly collapse would set rural NZ back 10 years.

[minimoke]

SCF are down sizing (from about $1.9b to about $1b).

Can we presume investors have $1.9b and they are choosing to give $1b to SCF leaving the other $.9b to go elsewhere. We might presume it could go to other finance companies (perhaps even a south island based one) who will invest, into bank deposits who will loan on houses and boats (just like SCF) or place it as direct capital into companies. Alternatively they may (as treasury has speculated) just stuff the cash under the mattress - but since this is already being done due to a lack of confidence perhaps its better to wipe the slate clean, set up a regulatory environment which has teeth and gives investors confidence so they get their cash back into circulation again.

[Beagle]

Ahhhhhh, a regulator with real teeth, wouldn't that be nice.

I am sure we are all aware of the forthcoming so called "super regulator" and I'm aware that the Securities Act is being re-written this year. Does anyone know how the Govt are getting on with the review of the Securities Act ?

Until this Act is thoroughly updated with proper and appropriate penalties, I think the Judges are hamstrung by such pathetic contraints as a maximum of 5 years imprisonment and a $300,000 fine, which will inevitably result in home D and a pathetic fine.

What we need to see is a maximum term of imprisonment of 20 years and a maximum fine of $100m, only then will their be a sufficient deterrant to serious Securities Fraud.

[minimoke]

Just wehn things were looking up!


SCF
20/08/2010
CREDIT

REL: 1729 HRS South Canterbury Finance Ltd

CREDIT: SCF: Lowered credit rating for South Canterbury Finance

20 August 2010

Lowered credit rating for South Canterbury Finance

South Canterbury Finance Limited acknowledged today that Standard & Poor's
has revised the Company's long term credit rating to CC, maintained the short
term rating at C and the outlook for both the long and short term credit
rating as Negative.

South Canterbury Finance Chief Executive Officer Sandy Maier says good
progress is now being made on the recapitalisation of the business with the
target of making an announcement on 31 August 2010.

"This will be of far more significance for all stakeholders and we would
anticipate that Standard & Poor's will want to undertake a review of the
Company's credit rating soon after."

"There is confidence amongst all parties involved in the recapitalisation
process that a favourable outcome can be achieved and that, following the
completion of that process South Canterbury Finance can continue to operate
as an active supporter of small and medium business enterprises."

"In the meantime, South Canterbury Finance is comfortable with its liquidity
position and continues to meet all obligations as they fall due."

South Canterbury Finance continues to enjoy the Crown's extended retail
deposit guarantee scheme which remains in place through to 31 December 2011.

"Nothing has, or will change, to alter the protection that eligible investors
enjoy under that scheme," Mr Maier says.

As a consequence of the change in credit rating, a memorandum amending the
Company's current prospectus will be registered as soon as possible.

Ends

Contact

Sandy Maier 021 163 3806
Chief Executive Officer
South Canterbury Finance Limited
End CA:00198649 For:SCF Type:CREDIT Time:2010-08-20:17:29:12

[Balance]

The downgrade effectively means SCF is a goner - unless it gets recapitalized next week.

[Beagle]

Just wehn things were looking up!


SCF
20/08/2010
CREDIT

REL: 1729 HRS South Canterbury Finance Ltd

CREDIT: SCF: Lowered credit rating for South Canterbury Finance

20 August 2010

Lowered credit rating for South Canterbury Finance

South Canterbury Finance Limited acknowledged today that Standard & Poor's
has revised the Company's long term credit rating to CC, maintained the short
term rating at C and the outlook for both the long and short term credit
rating as Negative.

South Canterbury Finance Chief Executive Officer Sandy Maier says good
progress is now being made on the recapitalisation of the business with the
target of making an announcement on 31 August 2010.

"This will be of far more significance for all stakeholders and we would
anticipate that Standard & Poor's will want to undertake a review of the
Company's credit rating soon after."

"There is confidence amongst all parties involved in the recapitalisation
process that a favourable outcome can be achieved and that, following the
completion of that process South Canterbury Finance can continue to operate
as an active supporter of small and medium business enterprises."

"In the meantime, South Canterbury Finance is comfortable with its liquidity
position and continues to meet all obligations as they fall due."

South Canterbury Finance continues to enjoy the Crown's extended retail
deposit guarantee scheme which remains in place through to 31 December 2011.

"Nothing has, or will change, to alter the protection that eligible investors
enjoy under that scheme," Mr Maier says.

As a consequence of the change in credit rating, a memorandum amending the
Company's current prospectus will be registered as soon as possible.

Ends

Contact

Sandy Maier 021 163 3806
Chief Executive Officer
South Canterbury Finance Limited
End CA:00198649 For:SCF Type:CREDIT Time:2010-08-20:17:29:12

They need not bother amending the prospectus, the fat lady is due imminently, Sandy won't get his $5m bonus and all his eloquent talk will amount to nought.

[Beagle]

Standard and Poor's has slashed South Canterbury Finance's credit rating by 5 notches to CC and has warned the Timaru-based finance company faces a default within 10 days because its cash balances have substantially diminished in recent weeks.

From another business website. Its almost always interesting to compare what S & P actually say with the "spin" Sandy puts on it. Here's the full text:-What S&P says

Standard & Poor's Ratings Services said today that it has lowered its long-term issuer credit rating on New Zealand finance company, South Canterbury Finance Ltd. (SCF) to 'CC' from 'B-'. The short-term issuer credit rating has been affirmed at ‘C'. At the same time, the issuer credit ratings remain on CreditWatch Negative where they were placed on June 21, 2010.

"The rating action reflects a material weakening of SCF's liquidity and cash position beyond what we anticipated when we lowered the issuer credit ratings to 'B-/C' and placed the ratings on CreditWatch Negative on June 21, 2010," Standard & Poor's credit analyst Peter Sikora said. "SCF's substantially diminished cash balance--which is now at a level that in our view may see the company seek additional liquidity support--reflects a combination of loan repayment delays and weaker-than-anticipated reinvestment experience and new debenture inflows. This rating action is despite SCF having some success in managing forward maturities over the past few months."

We noted on June 21, 2010, that the rating could be lowered if the likelihood of success in recapitalization efforts was materially delayed or compromised or if new credit concerns emerged. The weaker-than-expected cash and liquidity position and the lack of progress in recapitalization efforts--as the Aug. 31, 2010, covenant breach waiver deadline approaches--has compromised SCF's business viability without the successful progression of recapitalization plans over the next few weeks. Even if recapitalization plans are progressed, we understand that SCF will also require trustee approval and support to progress and execute recapitalization plans after Aug. 31, 2010, while it is still in breach of trust deed covenants. While the company is pursuing a range of recapitalization options, benefits from these initiatives would only be recognized in the company's ratings once they were sufficiently progressed and a comprehensive assessment was done.

A CreditWatch Negative listing by Standard & Poor's implies a one-in-two likelihood that the rating may be lowered within the next three months. The rating will be lowered to 'D' if SCF does not meet any of its repayment obligations in full and on time. The 'CC/C' ratings recognize that there is a strong possibility that SCF could default on its obligations within six months. The most likely scenario for default for SCF is an inability to progress recapitalization plans before the expiry of its trust deed waiver on Aug. 31, 2010.

We may stabilize SCF's rating and review the CreditWatch if the company successfully executes the recapitalization of its operations and receives the necessary support from all stakeholders implicated in any such recapitalization. This would help remedy SCF's trust deed breach and help strengthen the company's current weak liquidity position.

[Alan3285]

From another business website. Its almost always interesting to compare what S & P actually say with the "spin" Sandy puts on it. Here's the full text:-What S&P says

Where are you quoting from?

Alan.

[Romulus]

Alan,

Interest.co.nz is probably your best bet

Regards