South Canterbury Finance Limited

[Winston]

What happens to the value of the Preference shares if the Government does buy into S.C.F?

[Balance]

What happens to the value of the Preference shares if the Government does buy into S.C.F?

Depends on what kind (if any) deal is struck between the negotiating parties.

[Balance]

Alan, I wish I had your bright, sunny and optimistic, disposition.

Alas, I am cursed with a restless brooding - I keep thinking: "how many more difficulties will they find if they further improve their audit and control mechanisms".

I am haunted by an old geology phrase: "If you want to shoot elephants; look where elephants have been shot before".

I am plagued with the notion that a greater mess might be just under the surface, down Timaru way ...

My only comfort is that my hard earned $$ are well away from these deep dark pits.

Fascinating how putting a few $$$ into SCFHA as a punt can warp a person's thinking.

http://www.youtube.com/watch?v=5j2F4VcBmeo

[minimoke]

Bill, two quotes:

Whatever colour you are, there's times when you must lose - Kursaal Fliers

The South Island is sometimes called the "mainland". While it has a 33% larger landmass than the North Island, only 24% of New Zealand's 4.3 million inhabitants live in the South Island. - Wikipedia.

And most of them live in Christchurch and most of them are Red - or so it seems as they are keen on voting Jim Anderton in for Mayor god help us!

[Enumerate]

What happens to the value of the Preference shares if the Government does buy into S.C.F?

Depends on the nature of the deal; or, indeed, the likely aftermath if there is no deal.

Should SCF fail - the SCFHA become subordinated debt ranking behind all the secured debenture holders. I think there is some prospect of recovery, for holders, even in this scenario. $120m of pref shares could be worth as little as $12m.

The "play" in this scenario is that the SCFHA holders are likely to be able to determine who conducts the administration and potential liquidation process. This is because the government becomes the single senior creditor (for a very large amount of secured debt) but in NZ law - you need a majority by amount and by number to control the creditors meeting.

The irony is that the government would be dealing with a hostile block of SCFHA creditors = all of the mind that it was the clumsy actions of Minister Power and his SFO goons that put everyone in this unenviable position. I think I would propose putting Hubbard Churcher as Administator - overturning any government appointment.

Of course Minister Power, who has shown a flagrant disregard for due process in the justice system, would probably institute some act of parliament to overturn SCF creditor rights. The mentally deficient NZ fourth estate would probably find all of this perfectly acceptable in their world of "the end justifies the means". Sophisticated global investors would take one look at these arbitrary interventions and assess that Robert Mugabe's Zimbabwe would be a safer place to invest.

The survival options for SCF have always been:

1) Sell the "bad bank" for no less than current impaired valuation;
2) Trade the equity assets for genuine tier one capital; or
3) Find a new source of equity.

Any attempt to compromise the interests of the SCFHA holders in a deal that involves any or all of the above would trigger administration, at this late stage.

The most likely option, in the survival scenario, would be for SCFHA holders to maintain the equity value of their investment but lose income for a period of time while SCF restructures and rebuilds. The machinery for achieving this is already present in the trust deed.

[minimoke]

Given the damage done to Allan's business and reputation by arbitrary government action, they can either cough up a compensatory package or they can endure political oblivion.

Enumerate, without wishing to rehas old ground but it was AH who did the HMF statements so they included investment's and cash balances that do not exist. What else do you need?

[fungus pudding]

And most of them live in Christchurch and most of them are Red - or so it seems as they are keen on voting Jim Anderton in for Mayor god help us!

No. God help them.

[Lizard]

What happens to the value of the Preference shares if the Government does buy into S.C.F?

My thoughts...

I would have thought not much different to what happens if any investor buys in - i.e. probably issue cancellation notice for dividends and then put a special resolution to a meeting of Holders that somehow substantially reduces the obligations to holders/value of prefs. As I read it, the divs are non-cumulative once cancelled and the only lever noteholder will have is their option to wait some years until ordinary shareholders want to pay themselves a div and have to first re-instate divs on prefs. Maybe 40cps or less with a valuation report that says it's fair?

Alternatively, any deal will be made conditional on pref holders agreeing to take a haircut on the value of their prefs anyway, when faced with the alternative of a long liquidation process which might or might not yield them any return in 5 - 10 years time... (probably not - liquidations being generally so costly!). Maybe 20-25cps with a valuation report that says not fair but reasonable?

Other option, maybe get offered to convert to ordinary shares and left with a minimal residual value after dilution by new investor - though seems unlikely a new investor would want these disgruntled's tagging along.

[Balance]

My thoughts...

I would have thought not much different to what happens if any investor buys in - i.e. probably issue cancellation notice for dividends and then put a special resolution to a meeting of Holders that somehow substantially reduces the obligations to holders/value of prefs. As I read it, the divs are non-cumulative once cancelled and the only lever noteholder will have is their option to wait some years until ordinary shareholders want to pay themselves a div and have to first re-instate divs on prefs. Maybe 40cps or less with a valuation report that says it's fair?

Alternatively, any deal will be made conditional on pref holders agreeing to take a haircut on the value of their prefs anyway, when faced with the alternative of a long liquidation process which might or might not yield them any return in 5 - 10 years time... (probably not - liquidations being generally so costly!). Maybe 20-25cps with a valuation report that says not fair but reasonable?

Other option, maybe get offered to convert to ordinary shares and left with a minimal residual value after dilution by new investor - though seems unlikely a new investor would want these disgruntled's tagging along.

The market will determine the price in the first instance.

If SCF goes into statutory management or receivership, game over.

[Balance]

Enumerate, without wishing to rehas old ground but it was AH who did the HMF statements so they included investment's and cash balances that do not exist. What else do you need?

How dare you assert that! The Statutory managers are Crown agents caught up in a conspiracy to destroy the South Island's most respected and honorable businessman.

AH would never stoop to using fictitious accounts - no way.

Or would he?