To get some positive news, why we not all watch “The Warriors” tonight ?

I think the USA have pledged that no company would be to big to fail in the future...maybe they have learnt from their mistakes? . Although SCF provide a valuable service to NZ small to medium sized businesses others will fill the frey, in my opinion creative destruction and rebuilding from the ashes is the best way forward. Receivership should be the result versus the taxpayer picking up the TAB for what is essentially a corporate failure.   

The quicker the creative destuction the quicker a recovery.

Agree - don't throw good money after bad. Put it into receivership and pay out the GG.

Oh dear, despite all this commonsense stuff, I just can't force myself to want SCF to go down the gurgler - the fallout for South Canterbury is going to be huge and very very messy.

Also, don't forget SCF owns Canterbury Finance, Otago Finance, Face Finance, and I forget all the rest.

Oh dear, oh dear, oh dear...

Come on Wa/olly, be a sport and chuck them all that money you made on the copper, that should be enough.

@slow friday,

The Government is on the hook for $1.7 Billion due to the crown guarantee,  providing $2-300 m in Capital is small change compared to pulling the pin and settling with all the depositors.

The true tragedy frankly is not that Hubbard will go down, fair enough if he wasnt paying by the rules,

Is what gets away, but he goes down.

Bryers got community service, Feltex 5 nothing, Petrecivic, wait and see

Hotchin, Watson?

The SCF business model is broken, so it needs to be broken up.  Management gets the boot and a receiver sells off the assets.  With 70 finance companies bust, investors had plenty of time to get out of risk and into safer assets.  They chased a higher premium for higher risk, and they lost.  Too bad.  I agree with those who say the decision is largely a political one.  

If National bails out SCF then it is one more indication that a snap election is in the cards.  JK will not want to piss off business donors.  It's a near run thing.  An announcement could come soon.  The pollsters are surely working overtime.

Mini stock crash in October.  Bigger stock crash in March.  Jobless rate doubles after Christmas season proves a bust.  Cost of borrowing starts to climb forcing large austerity measures.  Next two years are going to be a wipeout and nobody wants to have to justify cutbacks after bailouts.

who throws good money after bad. Only a fool. The fire sale of a few SI megadairies will help reality.

Expect Dairy Farms to settle back to pre-2000 prices in the next 2 years and the doing of "good business" to return to farming rather than idle land speculation

Maybe the Dunedin City Council could bail out SCF? It would be another gem in the city's portfolio, sitting beside the Forsyth Barr Rugby Stadium. Money is no problem in Dunedin. The ratepayers here have money to burn! Just on the quiet, I heard that the DCC has found Elvis alive and well. They have him lined up to play to sell out crowds every night at the new stadium. The harbour will be full of cruise ships full of Elvis fans. They will have to expand the Airport! Buy real estate in Dunedin if you want to make the big  money.

the BanksBig4) will be begging the Government to bail out as SCF as distressed sales of Dairy Farms down there could bring reality to land values which they fear most-the destruction of their equity.

They are already begging the Government to allow increased Overseas Investment in Dairy Land in order to save their arses.

RJ..............spot on.

starion I have written to Government on this issue today. It sucks!! They offer 8%!! Where was there margin?? ever??

Lets take an average say the $1.7b is leveraged @ 75% (bet it's more) against $2.2b of dairy farms the true value is at least 40% less say $1.32b so the loan book is $380m under water in reallity with plenty of other toxic property more like $500m 

Let me guess: this will be a too big to fail.

But I'm a taxpayer willing to compromise: the government ditches KiwiRail, and can use the money to save South Canterbury Finance for a few years, before it collapses anyway.

Bernard, can you please clarify how this piece talking up receivership unless there is a government recapitalisation (that latter I disagree with obviously), relates to SCF's own advice to the NZX this morning (requesting trading holt) talking of a new investor?

The two stories are at odds with each other; which is the correct one?

To quote the NZX

South Canterbury Finance had its securities halted from trading on the NZX debt market pending an announcement on a new investor.

"We are close to an arrangement with new investors, and we’re just putting a halt in place while the arrangements are finalised," said John Draper, a spokesman for the company. "I can’t go beyond what is in the statement."

razzor thanks for reminding me about the US. They can crank there Dairy production up so quickly it is mind boggling, and US dairymen and corporates are investing in production in South America and Eastern Europe

Good Dairy land can be bought in Georgia for NZ $3000 . Good dairying climate and easy transport to Europe, Asian and middle east markets.\

Your right I think the banks already realize that the true value of dairy farms here going forward is below half what people were paying during the frenzy.

They are very worried

Come on you guys... think. This needs to be assessed like a business deal. Is it better to pull the pin, write a check for $1.7bn under the guarantee and start a tidal wave that smashes the south island economy -- or write a cheque for say $300m and avoid all the damage, then get the chance to manage the problem to an orderly conclusion. It's a no brainer. Save the company now, avoid the bloodshed, manage it properly, and properly get a return in the medium term.

not to mention the political fallout. the government must be scared crapless about the blame game that will follow an scf failure

In these situations the first loss is the best loss. Let creative destruction take over and we will have a new equilibrium in 12 months. Prop up through taxpayer guarantees and our economy will be in the mire for decades. Hopefully John Key can see this and bites the bullet and lets it go into receivership. Deflation is ineviable and those with skiiny equity in their farms and houses will unfortunatly have to suffer... its just the rules of the game.

If the Govt do not  carry through their support of SCF,which they did when they accepted them intothe GGS,with the number of olde boy connections tied up with that company,and coupled with disgruntlement from National Party Supporters in regard to the ETS,the fallout will be sufficient to topple them from power.

what is the taxpayer on the hook for thanks to the GG ? 1.7 billion?

As they never complied with the terms of the GG can the Government politely refuse?they should!!

The rating required was obviuosly a jackup or obtained through the ignorance of the ratings agency to the Dairy Equity(negative) situation.

Could a group of motivated taxpayers sue the ratings agency?

It is quite clear that they never should have received the GG?

Who was the ratings agency?

What minister signed off?

I would have no trouble cancelling it !!

Look past SCF...it is the state of the rural land bubble that has the banks in lots of trouble...expect Cabinet to throw your money into the pot...in an effort to stop the rot.

I dont want the Government using tax payers money to bail these pricks out.  Its bad enough that theres a GG but why try to keep a brain dead patient alive.  Its not my problem others put their money into a rotten egg let the suckers rot.

Let it fail, no one held a gun to head of the depositors. They invested because they were attracted by higher interest rates than AA + AAA rated  trading banks and / or Hubbards spin and should have exercised appropriate due diligence . With higher reward comes higher risk . Why should  the taxpayer subsidise these particular investors??  My equities just went down 10-15% in last 9 months I dont see the difference in asking for a bail out on that. I new the risks going in or at least I should have.

I dont see the US goverment bailing out Maddoffs investors and that was supposed to be losses of USD 18 billion ( NZ$ 26 000 000 000) 

James on the issue of a GG I will be writing to the Government, the minister, the opposition,opposition minister, Winston, Peter Dunne(no waste of time), Ombudsman, UN , human rights guy-they wouldnt bail out a bunch of Samoan NZrs(the National Party) and anybody that will listen

As far as I am concern there can be no bail out and no honouring of the GG

PGGW is a company that has too many staff too many offshoots and is too greedy.  Their overheads must be massive due to their poor management and trying to be everything to everyone. 

John Key is not a politician...he's a businessman who happens to be the CEO of NZ Inc.

they /he will not allow the South Islands dairy industry and part of the backbone of our nations export economy, to go into chaos...the reason why the SFO went in to Aorangi was to get a micro look at Hubbards private world so they can extrapolate outwards when they absorb all of SCF in a recapitalisation programme and transmogrify it all into a Govt. owned SOE...no big deal..sound business practice, no danger to govt. guarantee...it's exciting.

John Key and his team are onto it..forget politics..thats' all dead..it's business time!

.

Government won't help, Hubbard says

Friday 27th August 2010

Text too small?

The fate of South Canterbury Finance hangs in the balance this weekend, with just four days until a waiver on its trust deed expires on Tuesday.

According to Hubbard himself, the issue is whether or not the government will support a rescue package that creates a "bad bank" to take on SCF's dud assets, and the Treasury is advising it should not. 

"We thought they would take up a bad bank offer," Hubbard says. "They have to make a decision over the weekend."

The issue will reportedly go to the Cabinet on Monday, for consideration because SCF is covered by the government's bank deposit guarantee scheme, rather than because Hubbard and his wife, Jean, were placed under statutory management in June, a rare use of the draconian legal process that allows state control of private assets.

Hubbard said last night the Treasury is advising against the taxpayer taking up the liabilities of SCF's non-performing assets. Yet this is a crucial element of the bail-out proposal favoured by the statutory managers, Grant Thornton, Hubbard says.

The bid was "contingent on the government making a contribution toward a bad bank and they rejected that," Hubbard said.

"The people running the process favoured this first bid even though it was a lower number," said Hubbard. "I don't know the reason for that."

He declined to name either the favoured bidder or the bidding party he wants to bring to the table.

"That would be difficult."

Hubbard said that he still hoped to help recapitalise SCF through the unidentified foreign bidder, whom fervent Hubbard supporters say is offering $300 million.

Hubbard hoped, if a deal was in the wind, that Trustees Executors, the trustee, might give a few days further extension to a waiver on a breach of the trust deed that has been running since March, and reflects the distress in the Hubbard financial empire.

Hubbard's supporters also say the favoured bid is offering only $150 million, half the amount available from Hubbard.

"Yesterday the board of South Canterbury Finance received two investment offers, the first of which was significantly higher than the other offer,” Paul Carruthers, head of the 'Stand by Hubbard' campaign said in an email.

"The higher offer was declined by the board of South Canterbury Finance in favor of the significantly lower offer.

"The higher offer, which was significantly higher than the offer the board of South Canterbury Finance accepted, would have been very beneficial to South Canterbury Finance and its investors," Carruthers claimed.

The SCF empire is not part of the Hubbards' personal statutory management, although its fortunes are closely tied to Hubbard's. Corporate resuscitator Sandy Maier is chief executive of SCF now, and focused on getting a new capital partner into SCF ahead of next Tuesday's deadline.

SCF bonds and preference shares, listed on the NZDX, were placed on trading halt Friday pending an announcement about a new and unidentified investor.

Sources close to the process ruled out South Island investor George Kerr and his Torchlight group, who last month confirmed they had raised $150 million to take advantage of stressed company opportunities, and which already have substantial exposure to SCF through a series of capital support payments over the last year.

Hubbard himself scotched rumours running among his many supporters that Russian investors were involved. "Not Russian," he said, declining to identify the nationality of the proposed investor. The Russian suggestion is credible because of Hubbard's long association with supplying Russian Antarctic bases, using ice-breaker ships and the helicopter fleet in which Hubbard still has interests.

Officials in the office of Justice Minister Simon Power, who invoked the statutory management, directed enquiries to the office of Finance Minister Bill English as the Minister responsible for issues relating to the deposit guarantee scheme

All you pessimists are idiots

If the Govt puts SCF into receivership it will lose between $400M and $600M in bad loans and receivers costs and NZ will also lose another finacial institution that has helped many NZ businesses. It won't lose $1.7B - that is just the amount of debentures it guarantees.

If it supports a bidder and leaves money in or immediatley makes a write down of the Bad Bank,  it will lose about $300M - half of the loss of a receivership.It will also save the company and allow a rebuild of SCF supporting NZ Business, which is critical in the current environment with no other finance companies left and greedy Banks not supporting business.

Even a retard would take the second option - let's find out what Key, English and Power decide

Well Monday won't only be D day for SCF but also for Sandy Maier and the board of SCF.

If they fail to get a successful bidder, they will have failed miserably and only be remembered for the huge cost associoated with their approintments.

Mr Maier and the cronies he hired as advisors will have been on a great gravy chain at the xpense of investors and the Govt/taxpayers.

All Hui and no Dui from Mr Maier - he will then disappear into the sunset for another twenty years - thank goodness by that time he will be in a rest home and not avilable for another fleecing on a Govt appointment.

If any government money goes into SFC I would hope ALL the staff on the gravy train get fired.  But I hope they let it fall over if they can't fix it themselves. No one else has had the help that this company has received.

Are the government going to be stupid enough to allow the receivers to be appointed,followed by a payout of a reported SCF receivership to be worked through,to allow them to get part of their $1.7 billion back in dribs and drabs.

Remember,IRD only got $2.2 billion from the four Aussie owned banks under the structured finance cases,so short term,this is handing most of it away again.

On the other hand,of the $900 million set aside for the GG,how much of this  in fact has been contributed by financial institutions in order to be in the regime ?

Wonder if the Pakistanis are taking bets on whether SCF bowls a no-ball tomorrow