South Canterbury Finance Limited

[Alan3285]

Actually, perhaps it isn't quite as negative as it at first appears.

Nothing unexpected in the results really - everyone was expecting big losses / write-offs.

However, what is unexpected is the willingness of Alan Hubbard to put in an additional $150m of equity (reviewed for fair price by the crown guys so I am happy to believe the figure is 'real').

If things were truly about to go belly up, then that would represent nothing more than a straight transfer of $150m of wealth from Hubbard to whichever group was last in line to get a payout (bond holders perhaps?)

Given that he is no fool, it seems to me that things are probably okay going forwards.


What is missing from this?

Alan.

[CJ]

If things were truly about to go belly up, then that would represent nothing more than a straight transfer of $150m of wealth from Hubbard to whichever group was last in line to get a payout (bond holders perhaps?)

Given his age, it is possible he is willing to take a bigger risk to ensure his legacy remains rather than making sure he has plenty of cash for retirement. (ie. is his motiveation maximising his wealth / ensuring his legacy / or ensuring investors aren't let down)

He hardly needs the cash. The beetle will go strong until he dies.

[Alan3285]

Hi CJ,

Given his age, it is possible he is willing to take a bigger risk to ensure his legacy remains rather than making sure he has plenty of cash for retirement. (ie. is his motiveation maximising his wealth / ensuring his legacy / or ensuring investors aren't let down)

He hardly needs the cash. The beetle will go strong until he dies.

An excellent point.

Either way, he has still just covered all the losses in the last period though, so there is no way his take-up of additional ordinary shares can be negative for anyone from the prefs, through bonds, to debenture holders?

Thanks,

Alan.

[Balance]

Hubbard has no choice. Either he throws in additional equity or SCF goes under - it's as simple as that.

Trouble now is that he has nothing much left of substance to throw in. Unless new equity can be brought into SCF ..... tick ... tick ...

Is Hubbard a fool? The answer is fairly obvious, I would have thought.

Have a read of this :
01 MARCH 2010

South Canterbury Finance Reports Huge Losses
Today South Canterbury Finance reported a huge $154.9m after tax ($211.8m before tax) loss for the 6 months to 31 Dec 2009. This is enough to wipe out the company's ordinary share equity, and some of its preferred share equity. As I predicted, most of this is due to a big write down on the company's property development loans.

This puts the company in breach of its capital adequacy and gearing limit requirements of its trust deed. To keep the company from recievership, Southbury Corporation has transferred ownership of its shares in HelicoptersNZ and Scales Corporation. This causes the company to breach two more requirements of its trust deed, equity exposures and single party exposure limits. The trustee has granted a waiver for these breaches for four months until 30 June 2010.

I expect that the company will shortly be downgraded two or more notches by S&P, as its liquidity position and options, a major concern of the agency, has been going backwards, and it has not moderated its loss experience, instead they have blown out several times over. (I've been wrong before in making predictions about S&P, however!) This would put the government guarantee extension out of reach of the company, and makes it unable to attract new equity or debt funding.

Mr Hubbard has been throwing good money, no, make that good assets, after bad and now he has run out of significant further assets. Now it is up to investors to decide if they want to throw their good money at South Canterbury Finance. I've predicted in the past investors won't do that. This explains the reluctance and smallness of the recent smoke and mirrors 'capital injection' and makes the company's future in grave doubt. The government guarantee will now be shown for what it always was: keeping institutions of questionable solvency going when they should have been shut down or restructured at creditors and shareholder's expense.

Mr Hubbard has thown everything he has into saving this company, in a possibly futile effort. Perhaps taxpayers should be thanking him for mitigating their loss incurred by Dr Cullen. Whether it is good stewardship of his resources is another question.

[minimoke]

Given his age, it is possible he is willing to take a bigger risk to ensure his legacy remains

I wonder perhaps if he prefers his legacy (with teh big 80 on the horizon) to be a man who built a great business, was pretty canny and when the going got really bad he did all he could to save the interests of those who have supported him over the years. He has now done all he can to save SCF (unless he wants to put his shareholdings in multiple other companies on the block) and he and the missus have at least $10m to drive off into retirement. Its now up to Sandy to raise SCF from the potential ashes. Alans hands are clean and he can meet his maker with a clear conscience.

[Balance]

I wonder perhaps if he prefers his legacy (with teh big 80 on the horizon) to be a man who built a great business, was pretty canny and when the going got really bad he did all he could to save the interests of those who have supported him over the years. He has now done all he can to save SCF (unless he wants to put his shareholdings in multiple other companies on the block) and he and the missus have at least $10m to drive off into retirement. Its now up to Sandy to raise SCF from the potential ashes. Alans hands are clean and he can meet his maker with a clear conscience.

Unquestionably a man of honor and integrity. It will be heart-breaking for him.

[Alan3285]

Unquestionably a man of honor and integrity. It will be hard breaking for him.

Absolutely - How far would he go (in terms of his other assets) if required?

$10m when you are 80 is more than enough, so perhaps everything is on the cards?

Alan.

[minimoke]

Its now up to Sandy to raise SCF from the potential ashes.

I wonder how he plans to deal with an anticipated 15% drop in apple crop this year and the delayed WHO decision? Its all well and good bringing the assets into SCF - but you also introduce a new set of challenges. It looks like Scales might already have maxed out their potential growth - meaning theres now only one way for them to go.

[winner69]

I wonder how he plans to deal with an anticipated 15% drop in apple crop this year and the delayed WHO decision? Its all well and good bringing the assets into SCF - but you also introduce a new set of challenges. It looks like Scales might already have maxed out their potential growth - meaning theres now only one way for them to go.

like they said about Helicopters and Scales 'The results for the current financial year will reflect more challenging
market conditions...."

[Balance]

like they said about Helicopters and Scales 'The results for the current financial year will reflect more challenging
market conditions...."

So what is SCF after this?

It's an investment company - not unlike Equiticorp in the old days. It derives the bulk of its funding from investors - lends some out but invests in companies and lends to them as well??????????

Let's hope it does not become another Equiticorp.