South Canterbury Finance Limited

[macduffy]

IT doesnt matter what kind of mud you put in a pot or how you stir it, it is still mud. I assume if SCF goes it will drag down PGW also?

If Brian Gaynor's statement that SCF had $322m cash or cash equivalents as at 31 December, 2008 is correct it might be a bit soon to write this company off.
Hubbard's willingness, and ability, to inject $40m new capital, effectively to meet the pre-tax loss, speaks volumes, IMO, unlike the situation with so many of our failed finance companies.

Disc: Not holding SCF debentures etc or PGW.

[Steve]

I recall DPC emphasising their 'cash & equivalents' as their cashflow dried up...

[Misc]

The cash they hold is about 10% of the loan book ... will not cover much ,,, as Hanover et al found out ...thisis they way finance Co's work .... which is why almost all have failed.

[Snoopy]

IT doesnt matter what kind of mud you put in a pot or how you stir it, it is still mud. I assume if SCF goes it will drag down PGW also?

My memory of the situation is that Pyne Gould Wrightsons (PGW) and South Canterbury Finance had no direct connection at all. None that is, until South Canterbury Finance bankrolled a cash settlement payout that PGW had to make to Silver Fern Farms. That payment was for damages as a result of the PGW initiated failed merger between Silver Fern Farms and PGW. At some stage PGW must pay this debt back to South Canterbury Finance. Failing that, South Canterbury Finance has the right to purchase new PGW shares (at $1.50) in lieu of being repaid. However with PGW shares trading at well below that figure, it wouldn't make any sense for South Canterbury Finance to exercise that option. That $1.50 'call option' for 16.666m PGW shares is worthless at anywhere near the current PGW market capitalisation.

My conclusion then, is that if South Canterbury Finance does go down, then that event will have no effect at all on PGW. Provided that is the PGW share price stayed below $1.50. If the PGW share price went above $1.50, then any receivers in a hypothetical receivership of South Canterbury Finance would exercise the call option to recover some assets by 'on selling' those new PGW shares. But as long as the PGW share price remains below $1.50 those receivers would have nothing to sell. The net effect on PGW on any failure of South Canterbury Finance is therefore likely to be nil. Except of course as an opportunity for the PGW finance arm to pick up some new business, as a result of the failure of a competitor.

I am sure someone will correct me if I am wrong.

SNOOPY

discl: hold PGW

[Steve]

Snoopy, I was musing on the implications for SCF if PGW couldn't repay the loan and the shareprice remained lower than $1.50.

[Misc]

More likely Lachie Mcleod and Kelt Finance cant repay .... there is at leat $41m of the $58m 'impaired' loans before you start looking at Fiji and other substantial exposures in the development sector ... imo. The PGW deal looks like a corporate gig , hence my speculation that the 3 may merge , with support from the Crown.

Misc

[winner69]

More likely Lachie Mcleod and Kelt Finance cant repay .... there is at leat $41m of the $58m 'impaired' loans before you start looking at Fiji and other substantial exposures in the development sector ... imo. The PGW deal looks like a corporate gig , hence my speculation that the 3 may merge , with support from the Crown.

Misc

SCF have siad on many occassions they are almost like a regional development fund anyway .... so govt 'assistance' in formalising such a thing could be on the cards .... somethng that the likes of Jim Anderton would be all for

[Toddy]

I thought that SCF success was built on farm lending. Did they get caught up in all of the Queenstown property hype.

[winner69]

I thought that SCF success was built on farm lending. Did they get caught up in all of the Queenstown property hype.

For whats it worth industry exposures are -

13% Agriculture, Forestry, Fishing & Mining
4% Manufacturing
3% Construction
7% Wholesale & Retail Trade
6% Hotels, Motels & Restaurants
18% Transport, Storage & Communication
5% Finance & Insurance
37% Property & Business Services
8% Personal Services & Housing

Make what you want out of that ..... tksnen form numbers in their Investment Statement

Misc seems to have a fair idea of whats going on ..... maybe misc can elaborate

[Toddy]

For whats it worth industry exposures are -

13% Agriculture, Forestry, Fishing & Mining
4% Manufacturing
3% Construction
7% Wholesale & Retail Trade
6% Hotels, Motels & Restaurants
18% Transport, Storage & Communication
5% Finance & Insurance
37% Property & Business Services
8% Personal Services & Housing

Make what you want out of that ..... tksnen form numbers in their Investment Statement

Misc seems to have a fair idea of whats going on ..... maybe misc can elaborate

Maybe we can simplify things.

Farming 13%
Property 70%ish (construction/hotels/motels/storage/property/housing)
Finance (car loans?) or is that under transport?

Yes, a very interesting breakdown.