South Canterbury Finance Limited

[winner69]

Are we surprise that it is in a mess?

A number of us have been putting up warning signs but few wanna listen.

SCF accounts have always been a mish mash .... every year there has been adjsutments to prior years accounts - reclassifying stuff so nobody can track it through the years, things that don't always reconcile etc etc

Whats really amazing with the latest hoo hah about the valuation pref shares in SIFH is that the company was only formed in March land yet in June they can't work out a valuation. One would have hoped that the original tranasction was at some fair market value which became SCF cost but now it seems that this cost is not market value (after 3 months) ....... does this suggest that the deal in the first instance was not at fair market value then.

And i suspect that the new auditors were also involved in thsi peer review and it was not picked up .... not a good look

And i wonder what S&P are thinking now ... using the finally got out audited accounts to 'upgrade' their credit rating

I fear we will hear heaps more in this developing story

Shame the boys from The Viaduct keep picking on the poor southern country town boys isn't it

[winner69]

Hi Winner69,




With respect to your point regarding whether the capital comes in directly to SCF or via Southbury which then subscribes for additional shares:

What would be the difference from the perspective of other investors in SCF (prefs, bonds, depositors etc)?

Does one option give greater security than the other? Which one would be more positive to pricing on the listed investments do you think?

Thanks,

Alan.

Have no opinion on these points but prob better for existing investors if it the cash comes directly into SCF from an IPO

If it came in through Southbury no doubt there would be hooks attached to any deal and the new money might take preference over the old money

Not really thought about it so just a guess

[Alan3285]

Hi Winner69,

Have no opinion on these points but prob better for existing investors if it the cash comes directly into SCF from an IPO

If it came in through Southbury no doubt there would be hooks attached to any deal and the new money might take preference over the old money

Not really thought about it so just a guess

Do you mention 'hooks' because there were hooks for SCF itself in the $27.5m of additional equity shares that Southbury purchased recently?

I understood it was just pure equity (ordinary shares), but quite possible I missed something sneaky!

Alan.

[winner69]

Hi Winner69,





Do you mention 'hooks' because there were hooks for SCF itself in the $27.5m of additional equity shares that Southbury purchased recently?

I understood it was just pure equity (ordinary shares), but quite possible I missed something sneaky!

Alan.

Don't know Alan

With straight equity you would hope not

And prefs should still rank ahead of that new equity ... no problem

But with other 'capital' injections haven't prefs been shunted down the line a bit .... like isn't the recent $75m from Torchlight pretty high up on the pecking list of things turn to custard

Question for you Alan ... have you an idea how much new equity SCF needs?

[Alan3285]

Hi Winner69,

Don't know Alan

With straight equity you would hope not

And prefs should still rank ahead of that new equity ... no problem

Agreed - any new ords should create more confidence for every other investor. I think that is why the market looked on the $27.5m so favourably. It wasn't so much the quantum as the statement that Hubbard (Southbury specifically) was making:

If they thought that things were shaky, they might have lent $27.5m but they wouldn't have put it in as equity since under any default, they'd probably lose all of that on a marginal basis.

But with other 'capital' injections haven't prefs been shunted down the line a bit .... like isn't the recent $75m from Torchlight pretty high up on the pecking list of things turn to custard

I suppose I think of it that the $75m of cash from Torchlight added a buffer of that amount, but for anyone ranking behind it (SCFHA for example) it also added $75m in front of them, hence no net impact except that it reduced the chances of a short-term liquidity crisis.

If we assume that SCF continue to pay the 'dividend' on the prefs then no impact at all. The only other possible issue is that the interest rate on the Torchlight funds is higher than the rates at which SCF are re-lending it (on a marginal basis) and that reduced the profits from which the SCFHA dividend is paid.

However, my contrary thought on that is that a failure to pay ANY dividend or interest or indeed redemption would be seen so negatively in the market that they won't do that unless things are going South totally (no pun intended!)

Question for you Alan ... have you an idea how much new equity SCF needs?

No real idea myself.

In some respects, I don't think it necessarily needs any new equity.

A committed, long-term, line of credit from a substantial financier would do just as much for SCF in that it would create confidence in the market place and allow SCF to raise debenture funding at lower rates, thus increasing profitability, and eventually increasing the equity cover anyway.

The issue is that it is hard for them to get such a line of credit right now - one that is not able to be pulled in the short to medium term.

Absent that, then if I had to guess, I would say that raising $100m of new equity would be sufficient to have the same impact, and taking into account the fact that Hubbard has guaranteed any additional losses on the loan books subsequent to 30 Jun 2009:

In addition, a legal underwrite agreement with Allan Hubbard will stand as security for any further specific loans that could become impaired over the current recession period.

Of course, the more they raised / put in to SCF, the better for other investors


Alan.

[winner69]

Nothing like a good headline .... but seriously if they looking at vulture funds to take these loans of the book it will be costly

Reported equity in the the to be restated accounts was $225m .... lets say that when all the 'adjustments' are done it is $200m .... take a hit on the property loans ..... and **** a pretty distrssed balance sheet

Never mind .... they will be non cash transactions so they don't count

South Canterbury flogs property loans as more losses loom

http://www.stuff.co.nz/business/personal-finance/

[GTM 3442]

Seems as though the market has responded to the recent news by re-rating the SCFHA's from 50c in the dollar to 30c in the dollar.

[Alan3285]

Hi GTM,

Seems as though the market has responded to the recent news by re-rating the SCFHA's from 50c in the dollar to 30c in the dollar.

Cool - perhaps we could buy some for 30c when the market opens on Monday morning?

Actually, there's a chance for you to make a bit, perhaps you could source them for us at 31c and make 1c on each one?

How many are you offering to source for us at 31c?

Thanks!

Alan.

[GTM 3442]

Alan - wouldn't that be taxable ? (shudders)

The SCFHA's are the only SCF instrument which has the capability to reflect the market's opinion of SCF's prospects. So they're somewhat of a barometer.

Over past months - 24c was oversold, 60c was overpriced, 50c seemed reasonable, but there's been news since then, and we're back to 30c.

Where to next.

[Alan3285]

Alan - wouldn't that be taxable ? (shudders)

The SCFHA's are the only SCF instrument which has the capability to reflect the market's opinion of SCF's prospects. So they're somewhat of a barometer.

Over past months - 24c was oversold, 60c was overpriced, 50c seemed reasonable, but there's been news since then, and we're back to 30c.

Where to next.

This is the sharetrader forum isn't it?


The point is that no-one is selling for 30c - the best you could get them for right now is 51c.

The last actual trade (and hence a market price with a buyer and seller), was also at 51c, so if you want to pick a number, that's the one.



Alan.