Trying to keep track of who is doing whom in the South Island is making my head spin....I just kinda get that feeling that the old geezer is going to get shafted, somehow...

No details of what security has been provided for the loan , or what the term is. So yes agree the 'old geezer' is being boiled.

Well a 'quality' lender has stepped up for old Hubbard.... but the question is what has Hubbard had to do to get the cash?

My pick is that there is a deal around the back where Hubbard has to acquire some loans from Georgie.... also would think that SCF is paying a pretty hefty price for this sort of lending... it may have to be unsecured also as the assets of SCF are pledged to the Trustee - not sure what the limits on prior charges are though...

The pressure is not off SCF, just shifted around slightly.....

And before Susan was a Renouf, she was a Peacock; who was white-anted as leader of the Liberal (National) party by his deputy. Does Bronagh have a big hat, I wonder......

Ans she was a Sangster too - which must be a cross between a singer and a gangster...

So...ACC is a significant shareholder in this melee. I'm scratching my head to remember if the CFO, or like, of ACC used to be something in PGC or thereabouts?

It's companies like this that have failed, Bemused, that have taken our money with them. Forgive us for having been once bitten....How many hundreds of years was it that Bearings was around? Remember how BIG Hanover was? Time and size has nothing to do with viability.

No. Your point was about "conspiracy theorists", Bemused, and for people like me to 'get over myself'. Where is your mention of "a strong and supportive shareholder is key" except in a secondary ,apologetic response to my post?

Strong and supportive are interesting words.....

I suggest that anyone in trouble since 2007-8 didn't read the tea-leaves right.

I saw it to the decade three decades out, to the three years eight years out, and to the year five years out.

Four years ago, we made our moves, knowing 2008 was the end of the window.

I did it by watching energy supply rates......

Rather than strong and supportive, go for informed :)

I don't profess to have a crystal ball, or make descisons based on gut feeling, but rather on the basis of gathered and analysed information, Bemused. So, far from being a conspirasist, I use sites like this as an adjuct to my information base. You may quite possibly have information surrounding this transaction that I do not. In which case you will be the more informed. I shall have to make my descisions based upon whatever I can find out. And, so far, this web of cross holdings, as I said in my first post on this thread, makes my head spin.

If folk think we put the boot in - they should read waht David Hillary has to say:

http://davidhillary.blogspot.com/2009/10/share-market-to-south-canterbur...

As a taxpayer I feel a bit like this shark

http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/austral...

"this web of cross holdings, as I said in my first post on this thread, makes my head spin."

I'm with you on that Harriet. Generally the only reason for all the cross shareholding and subsidiary companies is to hide stuff, either losses from investors or profits from the IRD. Suddenly assets can move to another related company and the other company gets liquidated, stiffing the creditors, especially the small unsecured guys.

Meanwhile the big shareholders sail on under another name. Look how many entities Watson and Hotchin have.

I don't see how Marac can just stuff all their bad debt in another entity and say look how great we are now, make us a bank. Its lipstick on a pig. Same owners, same management that made the bad loans in the first place.

Alan - I don't think most people have a hate list against anybody but when you see such large related party transactions its generally not a good omen. It looks like and often is, the management and major shareholders using the business as their personal piggy bank. And why do some of these companies need so many subsidiaries?

You can't help feeling most of these finance companies have been set up to soak management fees and bloated salaries out of investors. A bit like the banks actually but not as well capitalised or politically connected. How many of the trading banks could withstand even 5% of depositors wanting their money back tomorrow? Where would they get the cash except the government.

I'm sure that the transaction will work out very well for PGC, the facility security ranks way ahead of everyone else, debenture holders included, leaving PGC with little risk, and I'm sure a juicy return (12% p.a.?), and perhaps the chance to pull the plug on one of their competitors.

There are related party transactions within SCF and within PGC/Marac. If these guys want to raise cash for their own enterprises they should be up front about it.

If Marac's impaired(Bad) loans are of a reasonable level why the need to shove them into another entity. Why can't they remain on Marac's books?

Bill, SCF ran out of cash, and is in danger of doing so again, not because of a lack of liquidity in the NZ market, but because of solvency doubts. If a financial institution's solvency is in doubt, it needs to raise capital, and its ability to raise debt funding is reduced.

Did you know SCF preferred shares are trading at 35c in the dollar? Investors appear to put the chances of SCF failing at two to one (preferred shareholders would get wiped out if SCF fails).

SCF has plans to raise capital, but I doubt there are enough people with enough money who believe in SCF to provide the $250-500m SCF needs. The funding deal for the $75m is NOT a vote of confidence in SCF, the facility is so well secured, ahead of debenture holders, that even if SCF fails, the lender will recover all their principal and interest (and probably penalties too).

@David Hillary: With all due respect, you are failing to understand how securities markets work when you say that the SCF Prefs trading at 35c implies that 'investors' put the chances of them failing at two to one.

A simple example is probably best for you and others who might not have been exposed to this stuff before. I'll use easy numbers and assumptions, but you can follow along and substitute your own preferred figures later.

If the market rate of interest today is 5% for 'risk free' investments, and a security was issued by 'Risk Free Borrower' for $1 three years ago with a nominal interest rate of 4% (we'll also say that the risk free rate of return was 4% at the time) then that security would be expected to trade at 80c today.

Why, if the security is truly risk free?

Because, the rate of return from the security is 4c (per note) and you paid 80c for it (today), giving a return of 5% which is what we said the current market rate is.

This does not mean that 'investors' believe that there is a 20% chance of the issuer failing.

Now, if the security was trading at less than 80c, then *that* would represent a market opinion on the additional risk premium over 'risk free'.

There are plenty of resources on the net to assist in understanding this stuff, just use Google.

HTH,

Alan.

PS: The above is pretty simple maths and all basic 'finance 101' but the following is my opinion:

In my opinion, a fair return on the SCF Prefs today is somewhere in the range of 12% to 18% (a fair premium over what they are offering for debenture holders which is, I believe, around 8% depending on the term).

Given that their nominal yield is 5.61%, they should be trading at something between 46.8c (12%) and 31.1c (18%).

Right now, according to the stock exchange website, there are investors willing to buy for 36c and others willing to sell for 36.9c, so the market seems to be in agreement with my personal opinion, and is certainly pricing in some risk (as with any investment at all), but nowhere near your assertion that the chances of failure are two-thirds.

David, having re-read all that, it might come across as a bit patronising, but it wasn't intended that way. We all have to start somewhere, and if you haven't had any exposure to finance these things are a bit opaque to start with, but honestly, a couple of hours with anything like a 'Finance 101' text book will get you up to speed. I apologise if it did come across poorly.

Alan, Check the prospectus registered on 15 Nov 2006, page 63, it shows that the dividends are fully imputed. The rate is reset annually, based on a benchmark interest rate, plus 230 basis points. So, the instruments should not be too sensitive to interest rates, they are primarily sensitive to the risk premium on the intruments themselves.

The current rate of 5.61% p.a. is actually 8% p.a. pre tax.

I will also just add the following for anyone that is interested in such things:

1) The yield on the SCF Prefs is currently at about 14% (as of today and ignoring the ICs etc discussed above) and that is not incomparable with other 'unsecured corporate bond' type investments available, hence the market is not unduly penalising SCF at this point (although it certainly was a few weeks ago when the yield was 24% but that was quickly corrected by the market). We have to remember that if we regard these as bonds (they are actually preference shares) they are totally unsecured and rank ahead of the ordinary equity holders only - behind even the unsecured trade creditors, hence we can't really compare to 'secured bonds'.

2) Hard to prove, but I believe that most investors neither look at, nor really understand the impact of the rate resets happening annually. There is no way we can prove this one way or the other (but then nor can it be disproven!) however there is empirical evidence to support by assertion in that the SCF Prefs too a value hit just after 1 Oct 2009 when the rate was reset down from about 9% (not sure what it was precisely) to 5.61%. This was 'irrational' in that anyone could have seen that coming by looking up the 1 yr swap rate in the preceeding weeks and months, yet it happened, which at least implies the point I make here.

HTH anyone who is interested!

Thanks,

Alan.