South Canterbury Finance Limited

[Balance]

SCF getting into trouble is no surprise when you look at how Hubbard was using the finance company as his private piggy bank to do exactly as he likes - with no heed to credit risk or cash flow considerations.

A good example of how reckless and dismissive of the fact that he was managing the public's money was the loans made to McLeod and other hanger-ons :

http://www.nbr.co.nz/article/key-sou...es-deal-132712

You need to be a subscriber to be able to access the article.

Essentially the deal was SCF advancing McLeod and gang $21.5m interest only-capitalising loans to buy shares off Allan Hubbard in Southbury - the loans were non-recourse and repayment limited to the lower of Southbury shares or the loan value! How sweet a deal is that?

So $21.5m went to McLeod and gang from SCF and was then, paid to Allan Hubbard.

History records that SCF got zippo out of the loans but Hubbard received $21.5m.

No words can describe the contempt investors in SCF should have towards the totally reckless and blatant self-serving use of their money.

It will be fair to attribute $21.5m of the SCFHA invested as being used for the loans to McLeod. Kinda puts it in perspective, doesn't it?

One hopes Hubbard has his day in court to explain how he justified making such loans.

[minimoke]

At least the Auditors (Woodward Meyers) have been fingered. Fined $38,000 today by the Accountants Society it is a little and a little late.

[Balance]

At least the Auditors (Woodward Meyers) have been fingered. Fined $38,000 today by the Accountants Society it is a little and a little late.

What a joke! For not auditing properly a finance company which had $1.7 billion of investors' money!

[Alan3285]

What a joke! For not auditing properly a finance company which had $1.7 billion of investors' money!

NZICA is a trade body, and its primary aim is to ensure that its members are looked after no matter what they may claim.

They give the auditors a slap on the wrist ($38k!) and pretend they are enforcing rules, whilst hoping that the govt doesn't step in and actually regulate the auditing industry.

Alan.

[minimoke]

NZICA is a trade body, and its primary aim is to ensure that its members are looked after no matter what they may claim.

I give them some credit for doing at least something. If SCF were a doctor you would get name suppression, an inquiry that took 5 years and a written censure.

But lets put the fine into perspective. For the 2009 Annual report Woodnorth Meyers got paid $517,000 a $22,000 increase from the year before. Not bad work if you can get it!

[Enumerate]

Interesting perspective:

http://www.nzx.com/news/managed-fund...nd-did-nothing

Contrast the inaction from 2006 to 2009 to the frantic (possibly misguided) efforts to close the gate after the horses have bolted in 2010.

[minimoke]

Interesting perspective:

http://www.nzx.com/news/managed-fund...nd-did-nothing

Contrast the inaction from 2006 to 2009 to the frantic (possibly misguided) efforts to close the gate after the horses have bolted in 2010.

Its relatively easy in hindsight to lay the blame at the feet of the government departments and no doubt they should take the burdon of some responsibility. But if we look at the scene in its context we'll recall Lianne Dalziel sat back and did sweet FA. She and Labour just did not have the skills to deal proactively with the inevitable fallout. The best they could do was rattle Cullen to set up the Deposit Guarantee scheme. Though I think we can also point the bone at National as well since they were relatively ineffectual in opposition in these matters and went on to support the Deposit guarantee.

[Balance]

Interesting perspective:

http://www.nzx.com/news/managed-fund...nd-did-nothing

Contrast the inaction from 2006 to 2009 to the frantic (possibly misguided) efforts to close the gate after the horses have bolted in 2010.

AS long as NZers maintain their obsession with property and property developments as the gateways to big riches and savings, the country will go through many many more investment wipe-outs.

The finance company sector disaster is simply a manifestation of that obsession.

And then there are those like the Hotchin, Watson, Petrocevic, Bryers etc of the business world who know exactly how to take advantage of that obsession.

Look at all the coastal and Lake districts properties being offered for sale now - with many more sections for sale on the way. All this in a relatively static population economy. Madness.

[Enumerate]

Look at all the coastal and Lake districts properties being offered for sale now - with many more sections for sale on the way. All this in a relatively static population economy. Madness.

It might come as a surprise, but I agree with you.

People have exuberantly priced property (coastal property, in even more excess, as you point out). People vastly underpriced the risk in mezzanine finance companies.

My view is that there is now opportunity in the finance sector with certain debt and hedge funds being vastly undervalued.

The "lesson" of finance company risk has been absorbed by the investing public. I am not certain that the correction in property has been steep (or deep) enough to put a dent in the "collective unconscious memory" to warn people off medium term exuberance in property.

[Balance]

And yet more revelations on how Mr Hubbard carried on with his lending (and borrowing) activities.

Playing Santa Claus with other people's money and bathing in the applause and accolades. He is a sly one, old Hubbard.

http://www.nzherald.co.nz/business/n...ectid=10690340