South Canterbury Finance Limited

[COLIN]

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.

It would be helpful if there was an attribution for the item you are quoting.

And I suggest one needs to be careful who one calls a "fool". At least you have the good grace to acknowledge Alan Hubbard as a man of "honour and integrity", in a later posting.

It rather saddens me to see the seeming determination displayed by certain members on this forum to see Alan Hubbard's empire collapse, and to be able to dance on his grave. I suggest that the snide comments and vitriol be saved for the real ratbags in the game, like Hotchin and Watson. Let's have a bit more objectivity here, shall we.

Personally I have not lost a wink of sleep about my exposure to SCF, and eagerly added to my holding of SCF010 today, at a most attractive yield. And before someone decides to label me "naive" I would assure them that I am a veteran investor who has done quite nicely over the years, thank you - even if I have had a few spills along the way!

[minimoke]

It rather saddens me to see the seeming determination displayed by certain members on this forum to see Alan Hubbard's empire collapse, and to be able to dance on his grave. I suggest that the snide comments and vitriol be saved for the real ratbags in the game, like Hotchin and Watson. Let's have a bit more objectivity here, shall we.

I don't get a sense of this occcuring here. What I see is a company displaying a number of yellow flags and posters making comments on those flags. And I'm not sure why we should save our vitriol for Hotchin and Watson - surely what they were doing was looking after shareholder interests - which is their primary responsibility. I'd say they did a particularly good job of this given their circumsrtances.

I'm aslo not sure your sleep patterns are something to be raising. I'm pretty sure there are a few people out there loosing sleep over SCF, Hubbard, McCleod, and Maier just to name a few.

[westerly]

In all the recent reports of SCF and it's problems facing a billion dollar repayment to debenture holders in the next 6 months or so, there was not one reference to the large sums due to be repaid by borrowers.
or the early repayment of the American debt. Just as there was with PGC and Marac there seems to be a strong desire from some in the media and some posters to see these mainland firms collapse.

Westerly

[minimoke]

In all the recent reports of SCF and it's problems ....there was not one reference to ... the early repayment of the American debt.
Westerly

See Balances post at 515. The great thing about these forums is that subscribers are free to bring any informaiton of relevance or interest to other subscribers and posters. That there, arguably, hasn't been a lot of positive posting may speak volumes about this situation.

[Balance]

Who needs positive postings when the company has been busy spinning yarns to the market?

Example :

"Fresh capital of $27.5m through convertible notes into Southbury Corp and in turn, into SCF."

Really? It was in fact covered by a fully secured prior ranking guarantee by SCF !

Capital = risk. Which part of risk or capital does SCF not understand?

[Alan3285]

It would be helpful if there was an attribution for the item you are quoting.

And I suggest one needs to be careful who one calls a "fool". At least you have the good grace to acknowledge Alan Hubbard as a man of "honour and integrity", in a later posting.

It rather saddens me to see the seeming determination displayed by certain members on this forum to see Alan Hubbard's empire collapse, and to be able to dance on his grave. I suggest that the snide comments and vitriol be saved for the real ratbags in the game, like Hotchin and Watson. Let's have a bit more objectivity here, shall we.

Personally I have not lost a wink of sleep about my exposure to SCF, and eagerly added to my holding of SCF010 today, at a most attractive yield. And before someone decides to label me "naive" I would assure them that I am a veteran investor who has done quite nicely over the years, thank you - even if I have had a few spills along the way!

Well said Colin.

I too have done very nicely out of SCF in the last 6 months or so, and with my eyes wide open.

It is quite sad to see the glee with which any potentially negative news is commented on, and the total absence of any comment on the positive from some posters.

We should all remember that there are many investors much less fortunate than you who are stuck in there with no way out.

Alan.

[Balance]

A positive development - SCF repays its USPP bonds early.

"the total absence of any comment on the positive from some posters."

As stated however, who needs positive when we have the Hubbard cheerleaders ably helping SCF to spin itsway into investors' wallets?

[westerly]

Gee Balance, a positive comment. However you posting of a commentary by some obscure blogger who appears to have an agenda all of his own is more typical of your unusually negative posts to this thread.
Westerly

[Balance]

Guess when this warning was issued?

And guess how many bothered to listen or follow the strong strong warnings?

The response then was similar to the reaction of the Hubbard cheerleaders now - speak no evil, see no evil and hear no evil.


ASB gives warning to small investors

By Georgina Bond


One of the country's largest fund managers has hit out at finance company deposits, saying they pose an unnecessary risk for small investors.

ASB Group Investments head Rob de Luca said New Zealanders had invested more than $8 billion with finance companies at rates of up to 10 per cent - believing their money was secured and their returns were safe.

"The reality is that neither of these things [is] true. Investors put their money with finance companies, seduced by the phrase 'first ranking secured deposits', but in many cases their money is anything but safe."

He said the money was frequently lent on to highly geared property developers or as high-risk personal loans to people unable to borrow from traditional sources.

Investors were not getting the appropriate compensation for the risk.

ASB Group Investments is New Zealand's third-largest fund manager, with more than $5.3 billion under management.

Although in competition with finance companies, "the reality is if one of these guys falls over it's bad for the whole investment sector, not just for them", a company spokesman said.

"We're more concerned that investors do the right thing and no one gets burned."

ASB's analysis of finance company reports showed many were earning weighted average interest margins of between 15 per cent and 40 per cent from their investments, but were paying investors' much lower rates, at between 9 per cent and 10 per cent in return.

"The ironic thing is if someone offered investors a return of 40 per cent they would automatically think the risks were too great.

"But investors aren't necessarily getting the return for that risk or maybe aren't aware of the risk they're actually taking," said De Luca.

Finance companies have had a dream run during the past few years on the back of a rising property market and periods of robust economic growth.

But concern has been mounting about what will happen if the economy and the property market hit the skids.

Yesterday, De Luca was urging caution:

"We've gone through a reasonably strong cycle in the investment space and property space, and we expect that to be a bit more subdued going forward ... we expect to see some issues," he said.

"We're saying to investors - be careful, speak to credit advisers when you look at an investment and really understand what you're investing in. Don't be fooled by the topline rate."

Finance companies came under the spotlight last September when the Securities Commission warned many were not keeping investors informed about the risks they faced - with some not meeting the minimum legal requirements.

That was based on an analysis of 30 companies' disclosure statements and was a precursor to a full report on the state of the industry.

The commission's report, released in April, said finance companies should improve their disclosure to investors.

Areas singled out for attention and improvement included: risk disclosure, principal risks, company activities, related party lending and the use of rating information and other disclosure issues.

A follow-up review of finance companies' disclosure statements this year will focus on documentation, with the commission looking to see if companies have improved their practices.

[Balance]

Gee Balance, a positive comment. However you posting of a commentary by some obscure blogger who appears to have an agenda all of his own is more typical of your unusually negative posts to this thread.
Westerly

Hardly obscure, matey.

Direct link from an NBR article (hope you read THE Publication once in a while - damn expensive but worthwhile from time to time) - http://www.lostsoulblog.com/

Note on Friday NBR interviewed Allied Farmers' Rob Alloway who warned of negative surprises in the Hanover loan book. In fact they were most unpleasant when the company reported yesterday.