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South Canterbury pays off Americans early
Timaru-based South Canterbury Finance has announced it has paid off its United States Private Placement facility a month early.
This gets it out from some unfavourable terms, imposed after it breached its bond conditions.
It is also making an early payment of the last installment of the refinancing fee agreed last year with the USPP note-holders.
The company says "it is continuing to enjoy the net inflow of funds that gathered momentum in January and has extended through February".
A good current liquidity position has enabled it to settle up with its disgruntled US bond-holders, it said.
Here are the key figures from the statement they issued today:
The final payment of $US17.7 million ($NZ24.3 million) being made today comprises the February payment of $US7.5 million, the final payment of $US10 million due on 31 March 2010, and accrued interest.
They also said they will issue their half-year financials early next week which will include a report on the Company's progress regarding strengthening of its capital structure.
16 Comments
'good current liquidity position'? Says
'good current liquidity position'? Says who? Their liquidity position and options are not good, see http://www.lostsoulblog.com/2010/02/liquidity-options-all-tapped-out-at....
Better to be debt free
Better to be debt free than debt ridden. If liquidity is the problem, how can they pay off debts early to begin with?
David, You have to look
David,
You have to look at it in context.
Even if your analysis is correct, what difference does it make whether SCF repays that facility today or in a month?
If it is 'onerous' (high interest) then it makes every sense to pay it back early if their liquidity position is sufficiently strong today (compared to what it will be when they have to pay it back) - which is presumably the case.
Alan.
Alan, I'm not giving them
Alan, I'm not giving them a hard time for paying them off early, it doesn't really make any difference, and if it saves them some finance costs, why not?
I'm just pointing out that their liquidity situation is anything but good: their liquidity options are running low and their funding book is building up a big wall of liabilities due on the expiry of the existing deposit guarantee scheme.
The only way they can survive now is by recapitalising in the form of cash $200m+, and getting the guarantee extension and to carry on offering high interest rates to investors. Hopefully, by the end of 2011 their troubles will be behind them. But if they run into any glitches, sorry, they don't have much room left for error.
I'd ignore the press releases
I'd ignore the press releases and follow the yields on their securities:
http://www.nzx.com/markets/nzdx/scf010/price-history
http://www.nzx.com/markets/nzdx/scf020/price-history
wow, 25% p.a. most recently!
wow, 25% p.a. most recently! Some nervous investors out there at the moment.
The 25% yield was for
The 25% yield was for the December 2012 maturity.
Yield on June 2011 maturity is 22%, 7.6% for October 2010.
Their big problem comes in
Their big problem comes in October as mentioned above - they have a shedload of guaranteed money coming due then.
I'll wager if they dont get a guarantee extension they are toast.
As as I could work
As as I could work out nothing is being rolled over beyond October.
How does a BB+ credit rating reconcile with yields over 20%?
One or the other has to be wrong.
PeterR SCF is *special* and
PeterR SCF is *special* and they have a *special* BB+ rating from S&P.
"Our immediate concern is that South Canterbury Finance maintain higher liquidity, leading up to its recapitalisation plans; its failure to do so would likely to lead to the company being downgraded," S&P said.
Negative pressure would abate if South Canterbury Finance was able to moderate liquidity pressures, manage its credit loss experience, eliminate related party investments and successfully restructure and recapitalise its business to a level that is consistent with a BB plus rating level, S&P said.
I.e. This seems to state that currently SCF is NOT consistent with a BB+ rating, but they affirmed it anyway.
David Hillary, Special indeed. That
David Hillary,
Special indeed. That is the result of being the first domino in a line of many. Given the list of serious problems they face:
They clearly shouldn't have been granted their current government guarantee, and certainly not an extension.
So who makes the call - no extension and take the hit in October, or grant it and hope the inevitable is postponed for a year.
Guys, The yields are not
Guys,
The yields are not 25% for the SCF010. The method of pricing the SCF bonds is unusual and it does not equate to yields. I don't why they do it this way but it is very confusing. My broker is unable to explain it to me as well.
If you take the SCF010 the coupon is 10.43%. The buy price for these (at 25%) is 0.71059 per $1 of face value. This equates to a yield of 14.68%. i.e. 10.43c in the dollar divided by .71059.
So whilst it isn't great it isn't as bad as you guys are making out. Same methodology applies to the scf020.
cheers
Mike in Welly, I have
Mike in Welly,
I have no problen with the 25% yield and believe it is correct. You have looked at the coupon, but I think forgotten that in this case most of the bond yield comes from the difference between the purchase price and that at which they are redeemed.
Purchasing at $0.71059 and redeeming at $1.00 adds considerably to the yield.
I would have thought the
I would have thought the current purchase price of the bond has to be 'added to' the coupon rate? The coupon stays at it's issue price ( 10.43%, I guess if I read the posts correctly); and add that fixed component of the bond to the current market price of the bond (at a discount to face value). If that's not right, and even a broker can't explain it properly to Mike in Welly, why would one buy it?
Talking of SCF did anybody
Talking of SCF did anybody happen to see the Nelson Evening Mail - they just funded a 100% purchase price of a holiday lodge in the Marlborough sounds which had fallen over - to another developer whom is in trouble ....dont really see how this fits with their trying to dispose of $300Million property book as reported in Star times- guess more backroom shuffling - to aviod the realising of a further bad debt- no wonder the yelds are high past Oct - this firm should be toast......
South Canterbury Finance Reports Huge
South Canterbury Finance Reports Huge Losses
Today South Canterbury Finance reported a huge $154.9m after tax ($221.3m before tax?) loss for the 6 months to 31 Dec 2009. This is enough to wipe out the company's ordinary share equity, and almost all 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.
http://www.lostsoulblog.com/2010/03/south-canterbury-finance-reports-hug...