South Canterbury Finance Limited

[Enumerate]

Syndicated version of the article:

http://findarticles.com/p/news-artic.../ai_n52405069/

[Snoopy]

And heres the table

Something strikes me as not quite right in this analysis. Scales was the holding company for Alan Hubbard's farming interests was it not (I guess it still is if Hubbard retains a 20% stake)? So why is land in the form of these farms given a 600% risk factor when money leant against other peoples farms under 'property' given a 350% risk rating?

All SCF has to do to greatly decrease risk 'on paper' is to paper shuffle these Scales farms out of corporate ownership and into direct ownership, with Hubbard himself as a 20% partner. That would be $400m odd off the 'risk rating of assets' at the stroke of a pen by doing, in effect, nothing.

I am not sure when the valuation on these farms were done for SCF balance sheet purposes. But a quick glance at one of the business papers this week revealed an article quoting PGGW Real Estate on farm values. The gist of the article was that South Island farmers had already taken the correction of Dairy Farm property values from their peak (down 20-30%) whereas North Island farmers had yet to take their medicine. I don't know what proportion of SCF lending was made to South Island farms verses North. But I'm picking that most of the lending would be on South Island farms. That means there may not be any more 'valuation skeletons' in SCF's closet.

Also should not the cash assets and government stock , rather than be given a 'zero to low rating', be used to directly offset preference share debt for the purposes of this capital adequacy calculation?

For these reason I would say Bruce McKay's table is probably unnecessarily pessimistic. Yet if SCF is indeed about to sell off some stuff durinng a forced sale cheaply, perhaps it is time to keep some capital aside and await a float?

This all seems so obvious, I feel as though I must have missed something? Have I?

SNOOPY

[Enumerate]

The other dimension of this capital guarantee is that even if SCF preserve BB counterparty risk - the guarantee premium is 1.5%!! They would have to be AAA to make the guarantee margin affordable.

I would suggest that SCF release two generations of secured debentures - one with the gov't guarantee and one without - the difference being the 1.5% interest margin subtracted from the former but paid to the punter in the latter. It would be fascinating to see how NZ fixed interest investors voted with their capital.

I see that the wholesale guarantee will lapse in April. Dealing retail with NZ finance companies, you are "government guaranteed" (or at least some of them) - dealing wholesale with NZ banks, no guarantee.

The retail version should never have been enacted. It guaranteed stupid risks with tax dollars and it is now damaging the finance sector recovery.

Another fabulous policy misstep from the mandarins in Treasury!

[Balance]

Almost inevitable that SCF's perpetual pref share holders are going to have t accept a restructuring of their pref shares into ordinary shares as part of a major capital restructuring.

NBR carried an article which showed that Hubbard's Southbury got $16.5m round robin payment from SCF (in addition to the $10m) from the Helicopter and Scales 'capital' injection. Not disclosed as it was considered immaterial! The spin continues with this company which has yet to learn that it is best to be frank & transparent.

[percy]

snoopy
I think farming interests are elsewhere. scales used to hold coolstores,shipping and apple interests, but been a few years since I held.

[Snapper]

http://www.stuff.co.nz/business/indu...scue-Strategic

SCF a white knight for Strategic? Don't think so. Frying pan to the fire for Strategic debenture holders and why would SCF want to take on more property development loans? What some may see as an equity injection others might see as just another load of old rope...

[Balance]

http://www.stuff.co.nz/business/indu...scue-Strategic

SCF a white knight for Strategic? Don't think so. Frying pan to the fire for Strategic debenture holders and why would SCF want to take on more property development loans? What some may see as an equity injection others might see as just another load of old rope...

Exactly. SCF cannot get its own house in order, let alone be white knight for Strategic! After Allied Farmers/Hanover, most trustees ad investors can see the folly of converting debt into equity.

Chris Lee clutching at straws now that SCF could very well muddle on through to Nov 2010, and then have the plug pulled if it cannot get its equity injection.

[minimoke]

Chris Lee clutching at straws

What on earth is Chris Lee thinking. Surely SFC have enough problems of their own which need urgent and detailed attention. Why would they want someone elses problems on top of their own at this stage of their life cycle.

[Morpheus]

What on earth is Chris Lee thinking. Surely SFC have enough problems of their own which need urgent and detailed attention. Why would they want someone elses problems on top of their own at this stage of their life cycle.

Perhaps the answer lies in the motive. Perhaps Mr Lee is worried about what the receivers find beneath Strategic? Perhaps he wishes for a takeover so that slate is cleaned. Perhaps Mr Lee is concerned about his reputation?

[Enumerate]

http://www.stuff.co.nz/business/indu...scue-Strategic

Why doesn't Chris Lee simply keep his mouth shut?

Like Don Quixote, he is off tilting at windmills - reorganising large mounds of decaying property loans and the debentures which funded them.

Under the retail guarantee scheme ... it will be the government who collects together all these moldering debentures - paying them out at face - and being left with the massive insolvency task of sorting our all the mare's nest of decomposing assets.

The private sector is not interested. Those remaining financial sector organisations do not need massive equity injections in the form of dead loans. The ALF lesson is that this type of deal simply destroys the reputation and integrity of the entity taking over the loans.

If SCF moves on Strategic it is because they imagine their choice to be either "falling together" or "falling over" as separate organisations. (a la Trans Tasman Properties - Robert Jones Investments and Seabil).