South Canterbury Finance Limited

[minimoke]

2) Introducing new capital to SCF effectively underwrites the government's retail guarantee risk. It is rational, financially, to pay something to have your risk exposure eliminated.

But theres the rub. A significant part of the value in SCF is its brand, particularly around AH. After Fridays revelations I can't help but feel the brand has been severely undermined if not fatally damaged. SCF didn't do enough to separate AH from its brand over the past 8 months.

[Enumerate]

Since when has geographic location been the criterion for borrowing?

Since the Trustee retains the ability to make the equity assets part of the charging group - the assets are not simply loan receivables.

[Enumerate]

But theres the rub. A significant part of the value in SCF is its brand, particularly around AH. After Fridays revelations I can't help but feel the brand has been severely undermined if not fatally damaged. SCF didn't do enough to separate AH from its brand over the past 8 months.

Tell that to the people marching through the streets of Timaru. My estimate is that SCF has huge positive brand profile in the business sector that matters the most. This is one of the primary reasons for my investment in SCFHAs - there is a significant demand for SCF financial services and there is significant loyalty to that brand.

[Enumerate]

Precisely. It's the rampant speculation and ramping up of land and dairy land prices in particular by the likes of AH, and SCF funding the speculative activity.

Now that comes to an end and it will be good for NZ in the long term.

Your analysis of dairy is flawed.

Dairy productivity, in NZ, has grown at a phenomenal average rate over a very long timescale. Some estimates put this at upwards of 15% pa. This productivity is driven by improving farming practice and biotech innovation. We do not even approach the intensive farming practice of some countries nor do we even remotely match their innovation investment (eg Nederland).

We have the most efficient grass fed dairying systems in the world - there is a premium for products in this category - further, our practice is closest to being "sustainable" rather than peak "efficient".

Fonterra, as a NZ "institution" also confers some significant advantages to NZ dairy farmers.

Is there a "Dairy Bubble?" or has Bernard Hickey had his brain stapled? (Hint: part of Bernard's problem is his poor statistical base for his claims - still waiting for the 30% collapse in NZ property prices?)

[Billy Boy]

http://www.nzherald.co.nz/business/n...ectid=10669541

Now who was it said....to hell with the spinoff's and the politics mean nothing..... note enough votes
etc.....
BB

[drew]

Drew, might I suggest you read the Report. Its easy reading, not complex but does give background to the essence of this thread. It would help to be just a wee bit informed.

It was originally argued by AH supporters that his investors were sophisticated investors - time and information has shown this is not the case. AH's investors (and anyone are quite free to invest in Dairy farms private equity or whatever - as long as they know that is where there money is going. Investors in Aorangi and HWM appear not to have had that knowledge.

Minimoke i have read the report (only 10 pages long) and dont feel any more knowledgeable about the situation. It did not go into any detail whatsoever about the missing 25% of funds which seems crucial to this investigation.

I still stand by my statement that govt officials and bureaucrats have no business telling investors what are appropriate investments for people. The statement that AH was putting money into things that were not appropriate for his investors is totally irrelevant. The real question is whether AH lied about what he was actually doing with their money.

Anybody is free to invest in whatever they feel is appropriate for themselves. If AH investors didnt know or understand what they were investing in because they didnt bother to investigate or just didnt care out of trust then thats their problem. If the investment goes sour they should bear the losses after all they dont expect to share the profits.

If they have been fraudulently misled then there is a case to answer. But to simply say AH investors didnt know what was being done with their money is irrelevant. It might make for an interesting academic study as to why some people are so willing to hand their money over without doing any homework. But thats not a reason for govt to step in an seize a business. It seems to me that the inclusion of this statement was grasping at straws.

In fact a good dose of the free market may make people open their eyes a little bit before handing their money over to strangers. Is there any difference between AH acting (as alleged) as a robin hood helping out the south islanders, which has supposedly led to the current state of affairs and govt officials acting as a robin hood and bailing out the AH investors? I am totally opposed to govt intervention in the market and bailing out investors even if they are victims of fraud.

The AH Stat Man is by no means a dangerous precedent - it is however extremely rare. There are clearly issues around bringing in the Stat Man. Time will tell if that decision was warranted. What does remain is wether there will be consistency in approach in the future - which begs the question why others weren't brought under Stat Man during the GFC. But thats water under the bridge now. Theres enough to mull over with AH's recent activites.

Agreed. I think what has been so surprising is that no actions have been taken against other firms like hanover or bluechip.

[Balance]

Your analysis of dairy is flawed.

Dairy productivity, in NZ, has grown at a phenomenal average rate over a very long timescale. Some estimates put this at upwards of 15% pa. This productivity is driven by improving farming practice and biotech innovation. We do not even approach the intensive farming practice of some countries nor do we even remotely match their innovation investment (eg Nederland).

We have the most efficient grass fed dairying systems in the world - there is a premium for products in this category - further, our practice is closest to being "sustainable" rather than peak "efficient".

Fonterra, as a NZ "institution" also confers some significant advantages to NZ dairy farmers.

Is there a "Dairy Bubble?" or has Bernard Hickey had his brain stapled? (Hint: part of Bernard's problem is his poor statistical base for his claims - still waiting for the 30% collapse in NZ property prices?)

Yeah right - Dairy farms selling at 3 to 4% return and that's sustainable.

It's all a question of price.

[fungus pudding]

Since the Trustee retains the ability to make the equity assets part of the charging group - the assets are not simply loan receivables.

You mentioned aggressive forced sales which according to you excluded Sth. Islanders. That is plain nonsense.

[Enumerate]

Yeah right - Dairy farms selling at 3 to 4% return and that's sustainable.

Do the math, Balance. You pay 8% for a capital asset that shows a 3% return, say. However, you can improve the return by 15% a year for 10 years, say.

Your return after 1 year is a miserable 3.45%

However, your return after 10 years is 12.14%

In fact, the first 7 years of your ownership are run at a loss. However, once you are over this hump - you have a fantastic asset. When you retire ... you are debt free and have an income producing asset worth several million$.

It is a "get rich" slow scheme - but a "get rich" scheme none the less. This is why dairy is so popular and why the land prices are so high.

[Contrarian]

Gidday

I have a few questions,

In the event of not being able to nail down capital, what are the options for SCF, Stat Man, Receivership, liquidation & what does each mean?

If the trigger for Govt guarantee kicks in, do all the scf010,020 &030 get treated the same ? 010 are until 15/12/12. & the SCF030 are so close to maturing $100 mill 8/10/10 but they only have $10 mill? so that's not likely.

SCFHA $100m Perpetual
SCF010 $125m 15/12/12
SCF020 $125m 15/6/11
SCF030 $100m 8/10/10