South Canterbury Finance Limited

[Enumerate]

Arne't NZF010 convertible to normal shares at NZF's discretion in 2011 though? So not really comparable with SCF0x0s which are just straight bonds?

Yes, this is true - that is why they are Capital Notes instead of debentures. The value of conversion is by a typical 95% VWAP of the 20 days prior to maturity date. Maturity date is 15/03/2011.

Remember, current market capitalisation of NZF is about $15million. There are over $20million of NZF Capital Notes.

My current view is that:

1) if the companies situation were to remain the same as the current situation - they would find roll over or repayment a better option compared with replacing current dominant shareholders with capital noteholders. They are profitable at existing levels of debt - they need to increase capitalisation well before the maturity of the capital notes.

2) if the company were to get into trouble ... this is the classic death spiral situation - in which capital noteholders become the new owners and existing holders would be wiped out.

[Jaa]

A full 2.9m SCF020 bonds traded today, 3% of the total on issue - that has to be some kind of record!

Been interesting watching the trading of SCF020 versus SCF030 this week. Has taken a full 3 days for the yields to come into line. As you can benefit from SCF020 for longer than SCF030 I would expect its yield to actually be lower once things have settled down. Any guesses for where it will eventually settle? 7%?

[winner69]

Made the guys at the NZX work overtime waiting for the interim report .... the good old after 5 trick

http://www.nzx.com/markets/NZDX/SCF0...eport-Provided

Completely out of date but gives a lot of insights into what a disaster SCF is and reading some of the notes you would have to think there is heaps more to come oout

A $200m loss .... equity at Dec was $55m .... obvious the recent $22m was needed as a balancing item to allow the auditirs to say we present these accounts on a going concern basis

No wonder Treasury is still worried about finance companies

Good old government eh .... allowing SCF to continue in business ... even though the extended guarantee costs SCF more than $2m a month

As a taxpayer am I proud we bailed them out .... no

[Enumerate]

A $200m loss .... equity at Dec was $55m ....

Let me see ...

Ordinary Shares $285million
Perp Pref Shares $120million
Retained Earnings ($322million)

Total Shareholders Equity $55million

Why oh why would you buy SCFHA's? Maybe if you paid 25cents per share and reckoned a 20% pa yield was compensation for the risk of having payments halted.

It is clear the company is desperate to improve capitalisation ratios. Almost $2billion of liabilities funded with $55million of capital is scary beyond words.

They have $245million in impairment losses on a book of $1.5billion. This is about 16%!! It is difficult to tell if this is the difference between the default rate and the recovery rate (could be 16% default rate with 0% recovery rate, or 32% default rate with 50% recovery rate, etc.) This is seriously ugly - I would have thought an 8% rate would have been considered a disaster. It is certainly not over yet .... expect the current year to bring more of the same..

Restatement of past periods with significant additional losses - not a good look.

Since balance, we have the introduction of Scales/Helicopters and the $22million. My basic assessment is that even with these changes equity holders and pref holders have been essentially wiped out. We are now waiting for a deal to be announced in which the new owner of SCF will introduce capital to a level to meet capital adequacy ratios. How much consideration existing equity holders receive is really up to the largess of the new owner.

[Alan3285]

Why oh why would you buy SCFHA's? Maybe if you paid 25cents per share and reckoned a 20% pa yield was compensation for the risk of having payments halted.

Yep - I totally agree with this.

I won't be getting back in to the SCFHAs unless the price gets well below its historical low (23c off the top of my head).

My current (gut) feeling is that I would have to see 15c to get me interested at this point.

The SCF010s at 40% yield a few weeks ago were a good buy though ;-)

Alan.

[winner69]

Save some some research

http://www.lostsoulblog.com/2010/04/...anterbury.html

Quote .... There seems to be a theme developing: SCF announces a transaction, and claims it shows a creditor or investor is showing confidence in SCF's prospects and future. Months later, when their prospectus or accounts come out, the full story emerges that the transaction was secured by prior charge on SCF's assets in some way or other, perhaps along with further impairments, losses or other bad news. I wonder how long it will take to find out what assets the latest convertible notes are secured over. As for the quality of the accounts themselves ... struth!

A complete disgrace ... those accounts are rubbish .... and us taxpayers do all we can to ensure they survive

The NZX should makes comment .... yeah right

[Corporate]

Save some some research

http://www.lostsoulblog.com/2010/04/...anterbury.html

Quote .... There seems to be a theme developing: SCF announces a transaction, and claims it shows a creditor or investor is showing confidence in SCF's prospects and future. Months later, when their prospectus or accounts come out, the full story emerges that the transaction was secured by prior charge on SCF's assets in some way or other, perhaps along with further impairments, losses or other bad news. I wonder how long it will take to find out what assets the latest convertible notes are secured over. As for the quality of the accounts themselves ... struth!

A complete disgrace ... those accounts are rubbish .... and us taxpayers do all we can to ensure they survive

The NZX should makes comment .... yeah right

Jeez I wonder if EY will sign these off.

[Dr_Who]

Jeez I wonder if EY will sign these off.

Didnt one of these geezer accounting firms (cant remember which one) sign off the ALF/Hanover deal and got the nta completely wrong?

[winner69]

Its a real worry when a CEO says something like this ... "But Maier said once that was taken out of the equation the company had a break-even year - better than many other finance companies."

It was the delusional normalised profit proforma that has the downfall of many in boom times before they go broke ... go on Maier you might be a hard honest man but please no bulls hit

[minimoke]

Have I got this right?. On 31 March SCF did not have a set of finalised 30 Dec Accounts. Nor did any accounts get past an Auditor.
On 1 April the goverenment accepts SCF into the Extended Guarrantee scheme - so on what basis was this decision made if there were no accounts available?

It wasn't until 10/4 that the Interim Aco****s are produced - and even then they are unaudited. And what do the Accounts show - a sad state of affairs with previous period adjustments (a YE loss now of $155m) and a six month PE loss of $191M and $55m in equity. And still the tax payers are going to provide support via the Extended Deposit Guarantee.