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SCF put into receivership, triggering govt payout; Bond investors, Torchlight win; Hubbard furious

Posted in News Updated

By Gareth Vaughan

New Zealand's largest independent finance company, South Canterbury Finance (SCF), has called in receivers McGrath Nicol after failing to secure new investors.

The move will shock the South Island rural economy and triggers a NZ$2 billion payout to investors under the government guarantee, including to speculators who bought bonds on the market at effective yields of up to 40%.

"A lot of bets in the casino paid off big time today," Chief Executive Sandy Maier told a news teleconference.

South Canterbury, which has been operating as a finance company in Timaru since 1926, threw in the towel shortly after 9.30 am in a statement to the NZX saying it had been  unable to complete a recapitalisation and restructure and Kerryn Downey and William Black of McGrath Nicol have been appointed receivers to the company and an array of subsidiaries.

South Canterbury's assets of almost NZ$2 billion are equivalent to around 0.8% of GDP, while Lehman Brothers' US$600 billion of assets was worth around 0.5% of US GDP. It is New Zealand's biggest corporate collapse since the NZ$2 billion collapse of Equiticorp in January 1989. The New Zealand dollar fell below 70 USc early on Tuesday evening in the wake of the collapse and is down more than 1 US cent since the announcement. A Treasury bill auction by the government was also poorly received with bids of just NZ$305 million in the NZ$350 million auction.

Early on Tuesday afternoon Allan Hubbard, the owner and the driving force behind SCF's growth into the largest South Island based financial institution, issued a statement attacking the government's decision in June to place his personal financial affairs under statutory management as the Serious Fraud Office launched an investigation.

'Knee jerk, sledgehammer response'

Hubbard said he believed he could have helped save the company if he hadn't been sidelined as a director and his assets hadn't been seized.

"Surely they realised that by freezing me out and taking over control of my affairs that they would be dealing a body blow to South Canterbury Finance?," Hubbard said in the statement.

"Instead they bring down the boom, take me out, freeze my access to my personal funds and now so many families, small businesses, farms and enterprises, throughout the South Island in particular, are going to be seriously suffering,” he said.

“It was an unnecessary, knee jerk bureaucratic response and it required a strategic solution not a sledge hammer.”

(Updates add CEO Sandy Maier's comments including NZ$2 billion government tab, Treasury comments including major change to pay all depositors in failed companies with guarantees including retrospectively, McGrath Nicol appointment, Hubbard statementBill English's pledge to avoid fire sales, S&P downgrade of SCF to D, Scales
Corp's reassurance it is still operating as normal, S&P's comment that NZ's sovereign rating is unaffected, poor NZDMO auction of T-bills, background, further detail).

SCF is covered by the Crown retail deposit guarantee scheme. It has about NZ$1.6 billion worth of debentures on issue and about 35,000 depositors according to Treasury. It also has NZ$250 million worth of bonds listed on the sharemarket which are also covered by the Crown guarantee. However, SCF's preference shareholders aren't covered.

Acting Secretary to The Treasury Gabriel Makhlouf said all depositors and stockholders on SCF's register of debt securities will be repaid by the Crown.

Makhlouf said SCF trustee Trustees Executors has been nominated as the eligible creditor under the terms of the Guarantee and the Crown today paid the trustee in full.

“Depositors and stockholders do not need to make a claim to The Treasury because the Trustee has made a claim on their behalf. All depositors and stockholders on South Canterbury Finance’s register will be repaid,” Makhlouf said.

Just NZ$7 million of cash

SCF chief executive Sandy Maier told a media briefing despite working until 4am this morning with three parties on potential rescue deals, agreement on a combination of price and terms proved elusive. Maier said despite "fantasies" reported in the media, SCF had never sought additional equity from the Government, merely worked with it in terms of the Crown guarantee. The receivership decision was largely taken yesterday.

Maier said SCF had just NZ$7 million of cash when he took the helm last December and about the same amount last night. The three parties SCF had been talking to about potential rescues included a large offshore South East Asian/US trust, a consortium of local and overseas investors and an offshore investment group which has previously had interest in New Zealand. He estimated the total Crown tab for SCF at about NZ$2 billion.

Maier noted the company was facing a considerable wall of debenture maturities in October when the initial Crown retail deposit guarantee scheme was due to expire. He said SCF owner Allan Hubbard's statutory management had damaged confidence in SCF through brand, but not a technical, connection.

SCF, whose credit rating was recently downgraded to CC by Standard & Poor's, had needed to raise at least NZ$180 million worth of new equity by today to bring it back in line with its Trust Deed after receiving a waiver to a Trust Deed breach from Trustees Executors earlier this year. Maier confirmed SCF hadn't applied to the trustee for an extension of its waiver breach which expired today.

Needed between NZ$100 mln and NZ$300 mln

Maier said the company had needed between NZ$100 million and NZ$300 million.

"It requires some bravery today to invest that amount of money especially in a finance company," Maier said.

However, SCF had received offers in that range but the terms and details proved sticking points. Other issues included some parties wanting to charge for doing due diligence on SCF and wanting to negotiate break fees. All up SCF had talked to about 15 potential rescuers.

Maier said SCF had received offers on some individual assets at about 35 cents in the dollar.

As of December 31 last year, SCF had about NZ$1.75 billion of loans outstanding.

Read South Canterbury Finance's announcement below:

South Canterbury Finance Limited announced today that it has been unable to complete a recapitalisation and restructure. As a result, the Company would have been unable to certify to Trustees Executors Limited, in accordance with the terms of its debenture trust deed with Trustees Executors Limited, that it was compliant with various financial covenants under the debenture trust deed for the financial year ended 30 June 2010.

Accordingly, South Canterbury Finance Limited has requested Trustees Executors Limited to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so. A further announcement will be made by the Company in due course.

And read the company's second statement:

Kerryn Downey and William Black of McGrath Nicol have today been appointed receivers to South Canterbury Finance Limited and the following of its subsidiaries:

- Belfast Park Limited
- Tyrone Estates Limited
- Braebrook Properties Limited
- FACE Finance Limited
- Fairfield Finance Limited
- Flexi Lease Limited
- Rental Cars Limited
- Galway Park Limited
- Helicopter Nominees Limited
- Hornchurch Limited
- SCFG Systems Limited
- Sophia Investments Limited
- Southbury Insurance Limited

'Prompt' payment predicted

Makhlouf said when an up-to-date register of debt security holders was available, the Crown and SCF trustee would arrange "prompt payment" to everyone on the register.

"We expect an orderly and prompt payment to South Canterbury Finance depositors and stockholders.”

Because the Trustee has been nominated as the eligible creditor, some depositors and stockholders who may not have previously been repaid will now be repaid by the Crown. 

"While this will incur an upfront cost, it is cheaper overall for the Crown because it facilitates immediate payout of depositors and avoids the need for the Crown to make future interest payments. Criteria relating to citizenship and tax residency do not apply and depositors and stockholders will not be assessed using those criteria," said Makhlouf.

"The criteria for being repaid is that you are on the South Canterbury Finance register of debt securities at the date of default. Ordinary shares and preference shares issued by South Canterbury Finance are not eligible for repayment. Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures and bonds issued by South Canterbury Finance."

Treasury said it was facilitating repayment of all of SCF’s prior-ranking debts along with all debt-security holders in order to put itself first in line to be repaid by the company’s receivers, behind only those protected by statute. Makhlouf said this means it can ensure an orderly and well-managed receivership. 

"Taxpayers will get the maximum value the receiver can recover from South Canterbury Finance.” 

“This is the cleanest, quickest way to achieve an orderly and well-managed receivership that minimises the cost to taxpayers and minimises the impact on South Canterbury Finance suppliers and the customers it has lent money to,” Makhlouf added.

Without becoming the first-ranked creditor, there was a significant risk that the Crown would not recover as much for taxpayers as it could because of the scale and complexity of the SCF receivership.  By creating the conditions for an orderly and well-managed receivership, it removes pressure from the receiver and protects taxpayers’ interests.

Treasury makes major changes, will payout for all depositors of failed companies with guarantees, including retrospectively

Furthermore, Makhlouf said, the Government had also decided today it would repay all depositors of guaranteed companies that default, including those that have already defaulted, regardless of any previous eligibility criteria that were in place for the Retail Deposit Guarantee Scheme. 

The scale and complexity involved with repaying SCF depositors altered the costs involved in running the guarantee scheme. Therefore repaying all depositors of all guaranteed companies that default will save taxpayers from having to pay ongoing interest that otherwise would have accrued as thousands of claims were assessed, processed and paid.

“Criteria relating to citizenship and tax residency will no longer apply and depositors will not be assessed using those criteria. The criteria for being repaid is that you are on the register of debt securities at the date of default,” Makhlouf said.

Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures, and bonds.  Equity securities such as ordinary shares and preference shares remain ineligible for repayment under the Crown guarantee.  He said the Government’s decision to repay all depositors of Crown guaranteed financial institutions that have defaulted means repayments will be made to some depositors who may not have previously been eligible for repayment.

"The decision applies for defaults by approved institution from the start of the current Retail Deposit Guarantee Scheme started through until it ends on 12 October 2010. The following eight Crown guaranteed institutions have defaulted: South Canterbury Finance, Allied Nationwide Finance, Mutual Finance, Viaduct Capital, Vision Securities, Strata Finance, and Mascot Finance.  The Treasury will publish details in due course about the process for repaying previously ineligible depositors."

However, eligibility criteria that include citizenship and tax residency will continue to apply in the event of a default after October 12, 2010 by entities approved for the extension to the Guarantee scheme. The extension to the Retail Deposit Guarantee Scheme runs from October 12 to December 31, 2011.

'No fire sales'

Meanwhile, Finance Minister Bill English has downplayed any impact from South Canterbury Finance's receivership on the wider economy or on New Zealand's sovereign credit rating. He argued the government had taken decisive action to control the receivership and pay back investors quickly to avoid disruption or any fire sale of dairy farming assets.

"There is no rush to realise the value of the assets is some kind of fire sale," English said. See the full story here.

Downgraded to D

Also, Standard and Poor's has downgraded South Canterbury Finance to D for default. But it said New Zealand's AA+ sovereign rating was not affected. See the full story here.

Fruit packaging and warehousing company Scales Corporation, which is owned by South Canterbury Finance, issued a statement saying it was not subject to the receivership and it made a NZ$10.1 million pre-tax operating profit for the year to June 30 just completed. Scales saw further profits in the year ahead.

The Receiver is now expected to sell Scales, along with other South Canterbury assets such as HNZ, New Zealand's biggest helicopters business, and a third of Dairy Holdings, which is New Zealand's largest dairy farming group.

English said he thought Allan Hubbard would be "as distressed as anybody" about the receivership today.

"It’s not something that he would have wanted, but the combination of the rapid growth growth of South Canterbury Finance, without the adequate infrastructure to run such a large organisation and a sharp downturn in market conditions, has meant he’s found himself in this position.

"As I understand it, there’s been a lot of discussion with Mr Hubbard over the last 12 months over his own affairs, the affairs of South Canterbury and what contribution he could make to sorting those out. "I think sometimes that’s been helpful and sometimes it hasn’t."

“There’s been ample opportunity for the owners of the business to save it. Mr Hubbard himself has made considerable personal commitments, which I think have been widely respected in the community and in the financial community.

"However the options have simply run out."

English delays overseas trip, Hubbard statutory management, Kerr's windfall

News of the receivership comes after Prime Minister John Key said yesterday that Finance Minister Bill English had postponed an overseas trip so he could deal with the resolution of the SCF situation. It also comes as the Serious Fraud Office deepens a probe into SCF's owner Allan Hubbard focusing on two companies he runs, Aorangi Securities and Hubbard Management Funds, which raised money from the public.

Hubbard has been in government appointed statutory management since June. The statutory manager, accounting firm Grant Thornton, released its second report last Friday. The report said there was an "alarming gap"  between Aorangi's income the amount it owes investors and that Hubbard had over stated Hubbard Management Funds' position by at least 25%.

SCF's receivership should mean a windfall for the Pyne Gould Corporation owned, George Kerr chaired Torchlight Investment Group. Torchlight contributed NZ$15 million towards a NZ$100 million loan it arranged for SCF earlier this year. The loan ranks ahead of SCF’s debenture holders under the finance company's trust deed and means Torchlight has a prior charge on up to NZ$151 million or 7.2% of SCF's assets.

The demise of SCF brings to 61 the number of finance companies, investment funds and other entities and financial products that have failed over the past four years, putting about NZ$8.5 billion worth of investors' money held in about 239,000 accounts on the line. See our Deep Freeze list here.

Additional reporting by Alex Tarrant and Bernard Hickey.

Your view? Comments below please

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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158 Comments

Somebody queue up Queen's

Somebody queue up Queen's Another One Bites the Dust...!

Wolly where are you?

Wolly where are you?

Down on the Mainland side of

Down on the Mainland side of the wee ditch anonono...whatsup doc?

you promised to say sorry

you promised to say sorry

Wait until we hear from the

Wait until we hear from the man from Dipton anonono....water still flowing under the bridge boy!

I am assuming that means

I am assuming that means there is no government intervention?

 

Did I see a tick down in the NZ$ just after the announcment or was I imagining it?

...and perhaps us tax payers

...and perhaps us tax payers should stock up on KY jelly, as this could be a bit uncomfortable otherwise...!

700mil....that's some er

700mil....that's some er shafting....

The big Q is, what can be done and will anything be done to make sure this never happens again....

regards

Yes............ what is your

Yes............ what is your mattress stuffed with currently...?

Fresh air regards

Fresh air

regards

Damn right. this is about how

Damn right. this is about how I'm feeling today, thanks to Mother Hubbard:

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\ \/ _--~~ ~--__| \ |
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\ \______// _ ___ _ (_(__> \ |
\ . C ___) ______ (_(____> | /
/\ | C ____)/ \ (_____> |_/
/ /\| C_____) | (___> / \
| ( _C_____)\______/ // _/ / \
| \ |__ \\_________// (__/ |
| \ \____) `---- --' |
| \_ ___\ /_ _/ |
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| | | | | |

What was so surpising about

What was so surpising about this announcement? Why is it good and bad?

To quote Spike

To quote Spike Milligan, 

"The bad news is there's no good news"

If this is the least cost option for the gov't / taxpayer then fair enough, but why were they included in the guarantee in the first place??

A thorough audit of them at the time should have revealed some serious warning signs.

Why were they included in the scheme??

  all down the gurgler now.

 

all down the gurgler now. oh to be a happy tax payer bailing out another failed investment.

that is why i drive past my brick and mortar investments and thank goodness my money is not trusted with a business thief.

Why why why do we have to pay for others poor decisions, with interest added WTF???v

Considering a large amount of

Considering a large amount of SCF losses will have been due to property deals gone bad I don't think you are on particularly firm ground with your conclusions..........

yeah i know - but these were

yeah i know - but these were speculative deals - usually risk and reward stuff, but here it seems all reward as all the risk became socialized.

my property deals, my bricks and mortar, are investments. always were, always will be, that is why they were investments.

i trust my decisions more and more as i see how you just can't trust anyone but yourself, at least with money anyway.

I would not disagree with

I would not disagree with that last sentiment - especially here in Shystertown NZ.

Oh look: A greedy property

Oh look: A greedy property bubble fanboy criticising others for sleazy financial conduct.

When I was young ( a long

When I was young ( a long time ago ) a very wealthy older man gave me some advice that stuck with me all my life. He said that the day you give your money to someone else to look after is the day you dont deserve to have the money anymore. That was some of the best advice I ever got.

great advice..

great advice..

I am please to read this.  As

I am please to read this.  As long as compulory Kiwisaver adn silly employer benefits schemes that tell me I "have" to have some of my salary channelled away in "benefits" to predetermined locations don't eat up all of my ability to independantly save then I am adopting this too.

I will have no-one to blame but myself in I fall out and drown, but at least I can always climb back in the boat while the sharks circle someone elses boat.

add to that........the return

add to that........the return of your money is more important than the return on your money!!!!

Great post Bobby

Great post Bobby

"Bricks and Mortar"

"Bricks and Mortar" investment, or should i say speculation, caused all this mess of the last 2 years.

Hang on a minute mate....the

Hang on a minute mate....the man from Dipton didn't stay in Noddy just to read this stuff...we have to hear from him...let's wait until we discover what the Stone Cutters decided.

Fair point

Fair point

They have to keep Teflon-face

They have to keep Teflon-face intact, Wolly. Sacrificial pawns, presidential-style elections and all that.

We're looking at a fair old bit of Nanny Stating, though, eh eh?

What a bad result from Sandy

What a bad result from Sandy Maier's efforts over the past 9 months

He has failed miserably - lied to the public around 5 bidders and as recent as this morning saying that there is good and bad in the  announcement.

The guy is a complete idiot - at least he won't get his guge bonus he was relying on and I hope that he doesn't get his contrcat paid out either - knowing him he probably already has it.

Good bye Sandy- retire in indignity - never to arise again

Just to try and flesh out

Just to try and flesh out what you are saying here Fired, are you simply bagging Maier in isolation or are you suggesting SCF would not be in this current cow pat were it not placed in SM?

Just trying to clarify your complaint angle.

Stay cool Fired, Sandy Maier

Stay cool Fired, Sandy Maier is just another of our "Greta Financial Talent of New Zealand" much like our much loved "Hanover Hero" Alloway.....

@ POP Your bricks and mortar

@ POP Your bricks and mortar is the reason for every single one of those finance companies. All of them invested into property.

And the taxpayer and rate payer has offered to bail out every leaky home owner, a debt equivalent to 10 SCF.

Dont get me wrong, I agree, there should be no bailout, but you should know that the reason these vehicles exist is to pander to NZs obsession wioth bricks and mortar. Who do think developed the subdivisions, apartments etc. that we buy off each other.

Absolutely spot on.  

Absolutely spot on.
 

It is very simple really. 

It is very simple really.  When too many people get on to any bandwagon such as investment property there is every chance it will destroy that market.

the difference is real bricks

the difference is real bricks and mortar versus virtual or future bricks and mortar. i only ever invest in something that is physically there, not some off the plans speculative deals, or leaky homes for that matter...

So I agree it was always a poor decision to back virtual property - stupid in fact. 

I don't think my bricks and mortar built in 1975 had anything to do with Hubbard and Co.

Well at least a receivership

Well at least a receivership will be cheaper than funding Sandy Maier and his mate advisors to run the company. And more will be achieved

No big deal -  Mr Hubbard

No big deal -  Mr Hubbard would never miss a payment would he now ?

I suppose when Sandy said

I suppose when Sandy said that announcement was 'good and bad' he meant it was good for the recievers (nice business) and bad for the taxpayer and preference share holders - the latter are wiped out I believe to the tune of $100m - another raging success from a Forsyth Barr placement/launch to go with the $100m they lost their clients in CreditSails......

What were all the last minute

What were all the last minute dealings? Can Sandy Maier confirm that the good assets in SCF have not been sold off overnight at mates rates??

sounds like it fell through

sounds like it fell through at the last moment even though  they would need a lot of courage to commit to buying this sucker

Wait  there is more news to

Wait  there is more news to come. Now the government will announce a creative solution to minimize the fallout.

yeah, only reason for bill to

yeah, only reason for bill to come back....

so what happens now ?

so what happens now ?

you get your money in five or

you get your money in five or six years.......... or as long as it takes the SFO to justify their existence.

Christov: That's Aorangi, not

Christov: That's Aorangi, not SCF??

hope your right RURU  but

hope your right RURU  but don't hold breath on that....... listening to Key ...he was very unclear on when and very clear on who was covered and who was not.

By the way RURU hurry up and

By the way RURU hurry up and register.....aint seen you in a spell.

Been reading; haven't had

Been reading; haven't had anything to contribute. As the old bat in the Just William books  says: "If you haven't anything sensible to say, don't say it."   The chooks don't mind maunderings and meanderings though.....

Sensibly: this is going to be a huge shakedown in the South for all those of the blind faith persuasion or who had nowhere other than Uncle Alan to turn to. But George Kerr and a few other similars are gonna be okay...funny that.

People like me who extricated the Olds from SCF last year (three widows and a pair of octogenarians -- jeez could have set up my own finance company) are feeling vindicated.

Taxpayer on the hook for 1.7

Taxpayer on the hook for 1.7 billion. That's $425 for everyone of us. And we're borrowing $250 million a week. And we have a 700 million train set to support. Len Brown promises billions of spending in Auckland City. National rearranging the deck chairs.

B de B - the train-set is the

B de B - the train-set is the odd one out. Going on under this, is the limits to growth, and resource scarcity. Roads and road transport are fossil fuels. Rail and shipping are relatively immune, and need to be kept.

I know it's tempting to just see today in isolation, but standing back and getting the really big picture is the talent. "My kingdom for a horse" comes to mind, as an example. Doomed, but good .....

I make that around $1000 +

I make that around $1000 + interest per private sector worker.. being just 1.6 million of us carrying the rest of the country.

Hmmm thats $1,600 from my

Hmmm thats $1,600 from my household.  Is this the end?  How many more taxpayer bail outs are required?

Reading up SCF Prospectus

Reading up SCF Prospectus (2008) nice smiley  honeyed  photos of Lachie McLeod, Robert White, Stuart Nattrass, Graeme Brown, Kevin Gloag, Peter Broswoth all youngish with every uni  degree available, all ex bankers, and all missing......

The fact that the eleventh

The fact that the eleventh hour  possible's fell over could also indicate the SFO did indeed find impropriety and are indeed to mount a case.

A shake of the head is as good as a nod and a wink to interested (past tense) parties .  

Oh, oh - going back to that

Oh, oh - going back to that Sandy announcement of bad news/good news and 'surprise'......

My spidey sense is tingling.

We just had the 'bad news'.

The 'surprising/good news' is that the government will now step in and rescue SCF, chopping it into bad bank/good bank............

I hope I am wrong.

hope so too andyh but it's

hope so too andyh but it's got the stink............ain't it .

The govt options both add up to stall and spin including the SFO who will drag this on as directed until we bore of it or die whichever comes first.

Has anybody looked at the

Has anybody looked at the "related party" of SCF?  As I understand it, related parties are ineligible to receive benefits of the Crown Guarantee.  If monies from HMF or ASL are invested in SCF, this could be very bad news for those investors.....??

Will be not could

Will be not could be................ Key has already gone public on that one.

Stuff that...look up the

Stuff that...look up the line...the receivers do what?...flog off the assets to pay down the debts?...who is first in line ?...who is last?...do they call in the loans?...what would that do?...how many domino are on the table here?

Wally I think everyone will

Wally I think everyone will be waiting (which is another word for stalling) on the SFO to complete the investigation............................and you know how long that can take....!  

Agreed...they could stretch

Agreed...they could stretch this out into 2012.

"Great events cast their

"Great events cast their shadows long before them"..It will be a different world by 2012.

From John Keys recent

From John Keys recent comments it appears the deposit guranantee is lmited to a quantum of $900M amoung other things.
With the SCF receivership how safe does it leave deposits in other finance companies under the guarantee?
It will be intersting to se what happens when most guarantees run out i October... will there be any still standing? 

errr I think you are

errr I think you are forgetting the little matter of the extended guarantee which start Oct 12ish. A number of finance companies and building socs (Marac, F+P, CBS etc) are already signed up in that scheme so they will not be affected at all.

Very few will qualify under

Very few will qualify under the new terms of the extended guarantee

The point about the extension

The point about the extension andyh is the reduction in cover. A big change from one million down to 250K. I expect those larger sums to be cut down before the change thanks to this fiasco. There will be an exodus of capital if those players don't raise their rates and raise them high to cover the fear factor for sums above 250k. All sorts of waves spreading everywhere andyh.

Do I smell deflation in the

Do I smell deflation in the air?

PT, the provision isn't

PT, the provision isn't limited to $900 mln. The $900 mln (which is a net figure after what they think they can claw back) is what they think is an adequate provision at the time of the current govt accounts and may change if they decide they need to provide more or less.

Cheers

Alex

I will tryto find the

I will tryto find the article, but Key ade mention that many people donot understand the limitations of liability for the govt under the guarantee.

I will tryto find the

I will tryto find the article, but Key ade mention that many people donot understand the limitations of liability for the govt under the guarantee.

SCF lent very little to the

SCF lent very little to the Dairy farmers, the majority of the lending was to property developers...

The right outcome  at the end

The right outcome  at the end of the day. Nodoubt the investor thought he could get the Govt to underwrite much of his risk.  Good to see they didnt fall into the trap of socialising losses and privatising profits i.e. Kiwi Rail.

The brand was irrepairably damaged by events of the past two months and when the full picture comes out regarding AH dealings this will have proved to be the right outcome.

 

Anyone spot May Wang lurking

Anyone spot May Wang lurking around Stafford Street this morning ?

Surely the collapse of SCF is

Surely the collapse of SCF is yet MORE good news for the economy GBH?

In a backhanded kinda way it

In a backhanded kinda way it might help Bollard on some upcoming decisions...... and get that overvalued dollar down...............

of course that will be bad for motorists...freight...etc.... but a correction is necessary and so think of it as ............weird austerity.

Andy H : .......... it has to

Andy H : .......... it has to rain some-time !

...........the void left by SCF will be filled by new  upstarts , fresh-faced young eager beavers . Within a generation SCF will be forgotten . ............... Even Big Al will be consigned to history .

............the capitalist system does not stand around gnashing it's gums and wailing  for long . It moves on . ( page 3 of the Gummy Bear's Big Book of Capitalism )

When will they ever

When will they ever learn

When will they eeeeeeeeeeeeever learn.

(Bernard wanted it in song, folks)

could make a great board game

could make a great board game ......computer game......Where in the World is Wang.....is she behind that cow...........?

Very surprised to see this. I

Very surprised to see this. I thought the Government would step in to keep the show on the road. This is probably the right decision. Bad for the taxpayer though. 

This is the BEST decision for

This is the BEST decision for the tax payer. Remember this is a goverment guarantee.

Unless we are saying the Goverment should not have given the guarantee two years ago in the first place ?? 

It is better to know your loss now and cut off the cancer than wait and "hope" for a "lower" unknowable loss in the future. Especially given our "Great Financial Talents of New Zealand" has the history of blowing up everything they touch ...which Financial Company has done better than expected under moratorium/restructuring??   

Has everyone forgotten the Great Allied Farmers fiasco with it's great "Hanover Hero " story ??

Bill English  presser at 1pm.

Bill English  presser at 1pm.

Read this announcement from

Read this announcement from treasury - its big - it means that ALL depositors are paid out whether eligable or not.

Great for those bozos who thought they could rort the guarantee - Crown has paid out - so no more interest accruing at 8 or 10 % until they claim.

http://www.treasury.govt.nz/publications/media-speeches/media/31aug10

Nice link. I would read that

Nice link. I would read that as suggesting that everyone is going to get paid, the gov is going to take over and wind it up, sell it off in an orderly fashion.

 

Rumour on this site is that BE is having a press release at 1pm

Could someone flesh out what

Could someone flesh out what this means wrt who now owns what?  Has govt tipped in the FULL amount and now owns everything in SCF?  Or is something else going on.

At least we have a goverment

At least we have a goverment that is willing to bite the bullet instead of playing politice with every ball that gets into their hands.

For this action along I will vote for them in the next GE.

It is better to take a loss you know now  than to hope for a "lower" loss in the future.

Especially given our "Great Financial Talent of New Zealand" ability to blow up everything that falls into their hands....which Financial company in Moratorium has ever turned out better than expected ??

Is this around about way of

Is this around about way of the government taking ownership of SCF?

anyone who knows the ins and

anyone who knows the ins and outs of Hubbard, this has been on the cards for years. He has always shifted money one company to the next with no paper work, given loans to mates at no interest. 1+1=3 in his world, looks like that come crashing down, i guess his supporters will mortgage their hosues and inject some capital...oh no where are they now.

100% certainty Bollard will

100% certainty Bollard will leave the OCR alone until early 2011 now.  All that milk down in Timaru is turning to custard !!

dont worry cause  theres a

dont worry cause  theres a $2m loan secured by a document which says" in god we trust", but thats better than the $3m loan secured against the fitout of Showgirls.

time to bring back the death penalty.

Great job National. You get

Great job National. You get my vote in the next election. The first loss is always the best loss and you will avoid any side swipe back chat by repaying all parties rather than scrimpring. Now quickly find a buyer for those good assets and get things back on track.... hpefully this is well advanced.

Ordinary shares and

Ordinary shares and preference shares issued by South Canterbury Finance are not eligible for repayment.

Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures and bonds issued by South Canterbury Finance.

No paperwork needed by

No paperwork needed by investors as everyone on the registrar will be paid out regardless of eligibility.Doing this to save money because interest needed to be paid as well until paid back.

NIce one Labour & National -

NIce one Labour & National - 24 years since the mess of 87 and it happens all again. No balls in 23 years to fix anything up in case you lost some votes. No right for us to complain about welfare cheats when this is going on.

Labour, National, ACT, Maori

Labour, National, ACT, Maori Party etc, what are they?  Nobodies from nowhere most of them. Most of them have never created or run a business. They are a bunch of opportunists that want to convey that they know what they are doing but really they are just looking out for themselves and what they can get out of the job and how many perks they can rort. You would be lucky if out of the 120 of them if you could find 3 you would leave in charge of your businesss for a year and expect it to make money. When you really think about it it is frightening that these nobodies have so much control over our lives and get to control a $200 Billion business, NZ INC. I dont know what the answer is but if we are to progress something has to change.

The main point that should be

The main point that should be addressed is that Finance companies should never have been included in the GG. Their whole business model was based on a fiction, by giving them such a GG it simply allowed them to suck in more and more money by offering high interest rates backed by the GG. It was as has been said free money.

 

 

 

Annon ...........it could

Annon ...........it could have been a nice back door to foreign deposits.

 Now Mr SFO what we'd like to

 Now Mr SFO what we'd like to .......know......is who....... made up the bulk of eligible payouts through the trust.

 I mean that's a lot of serious mom n pop loot considering the environment surrounding Finance Company instability.

 And the criteria covers off shore depositors..................we must not offend....

Their could be some Wang here yet.

The very question. And the

The very question. And the trusts; whose are they? I daresay Bill E will have all that info to hand for the taxpaying public at 1pm.

Ruru..... gutting is what it

Ruru..... gutting is what it is..... and now I think I've got an idea what the SFO are busy doing and bet your ass they got smoke machines on board.

P.S. time you registered....come on matey.

what's with the registering?

what's with the registering? I missed three or four weeks of banter.. do you get free gummy bears?

I.6 Billion.............. and

I.6 Billion.............. and GST to 15% for now.............are You HAppy

 

WELL ARE YOU.............huh.....?........punk.

Bollard should cut the OCR to

Bollard should cut the OCR to 2% in a fortnight ... give the economy a bit of a boost.  It sure feels like it needs it.

Bollard should get in a warm

Bollard should get in a warm bath and cut something else.... but he's not gonna do that neither.

A thirty year loan at 2%

A thirty year loan at 2% would stimulate the procedings..But next week when your comitted it goes up to 10 % wheres the wisdom in that.All very wobbleee.

FYI, story updated with

FYI, story updated with comments from Sandy Maier.
 

Ta

Ta

"Maier said despite

"Maier said despite "fantasies" reported in the media, SCF had never sought additional equity from the Government, merely worked with it in terms of the Crown guarantee"

 I think that was directed at the likes of you Mr Hickey!

I'd have thought more the

I'd have thought more the Herald and SST Simon...

so you are there. 1. How did

so you are there.

1. How did SCF ever get a GG?

2. Lachie Macleods liability eg. for related party lending for etc etc

And Lachie's payout under the

And Lachie's payout under the GG

Further comments added from

Further comments added from Sandy Maier.

the ratings agency new at the

the ratings agency new at the time they granted the rating which gave them a GG that a wall of debentures was coming?

did they not!!

FYI, apparently Allan Hubbard

FYI, apparently Allan Hubbard has issued a statement saying if he hadn't been removed from SCF's board and placed in statutory management, he could have helped to save the company. It's covered here - http://www.stuff.co.nz/business/personal-finance/4078712/I-could-have-he...

Why is all this happening?

Why is all this happening? Because everyone thought property prices could only go up. An assumption that will cost future generations dearly.

Why is all this happening?

Why is all this happening? Because everyone thought property prices could only go up. An assumption that will cost future generations dearly.

Whoop comment of the day, go

Whoop comment of the day, go me, but seriously, a hell of a lot of business was structured on this presumption and failed because of it, the fool-proof way of investing will always be to diversify your risk while building your portfolio and adding to it.

I have got to go do some work

I have got to go do some work now but I think Bernard and yourself(Gareth) should do a piece on what happens if a company with a GG is found to have that GG by fraud?

Why have treasury paid out to the receivers already is this normal?

as I said RJ............

as I said RJ............ depends on who the major TD and Bond holders were and now with the SFO swishing footprints we may never know.

How about..................Billy Bob did he have a slice...?

How much was foreign TD......?

Excellent point; a reasonable

Excellent point; a reasonable audit of SCF at the time they were given the guarantee should have sounded warning bells?

Grrr this makes me angry.  I

Grrr this makes me angry.  I want heads to roll, jail time, the works.  We've just been burgled

Bernard .....do you see what

Bernard .....do you see what I meant by Hubbo being Quixotic by nature....

 He still wants a charge at it without the lance.....that is now inserted firmly in his posterior.

overtaken by Bernard's

overtaken by Bernard's warp-speed reporters

Ruru, read our headline.

Ruru, read our headline.

Sorry just have. The

Sorry just have. The extension's today's promised surprise.

Have to laugh at the Treasury

Have to laugh at the Treasury statement saying that the Crown is the first-ranked creditor....apart from all the others.

They are the first ranking

They are the first ranking behind those given preference by law - e.g. unpaid PAYE or GST. That is normal under any debenture, you can't contract out of prior charges given preference by law AFAIK.

The point I think they are making is that when the receiver collects money, the crown are essentially first in line for payment of that money.

Many people who read the headlines will probably think the government are out of pocket to the tune of all SCFs government guaranteed liabilitites, whereas the actual amount the crown will be out of pocket will be this figure, less the prcoeeds of selling the assets of SCF.

Ok - prior charges are

Ok - prior charges are reportedly $175m, likley a lot more than just charges given preference by law. With that amount I guess maybe that advance from the torchlight fund (and then some) was a prior charge.

Thanks to Working for

Thanks to Working for Families I pay very little tax ... but this all smells horribly like a big smelly cowpat !!

Repaying everyone everything?

Repaying everyone everything? They can't be serious. Astounding. Is this to avoid the Standard and Poors downgrade of NZ?

Including interest up to

Including interest up to including today.

Is that a typo?

This is no diferent from the ponzis, games and autosurfs I and many other people (lots in New Zealand) were playing for 3-4 years up until about 2007. No different.

 

The queue outside the

The queue outside the Kiwibank branch in Timaru could set all sorts of records in the next few weeks as $1.7b is depositied back into a financial institution that is again guaranteed by the NZ taxpayer !!!.   What a wierd magic round-about life is !

That is why some banks have

That is why some banks have been advertising like mad recently for online deposit accounts. The ironic thing is that the finance comapnies that are currently covered by the extend GG are on paper safer than the banks who are not covered by the GG, as long as you only invest less than 250k. This is why the GG should be compulsory to all, not an opt in scheme. Other countries it is compulsory 

I see Alan Hubbard is still

I see Alan Hubbard is still claiming he could put it right - This is the same man who when he had a recapitalisation proposal and a new  cornerstone investor presented to him last August - listened to his trusted advisors (Forsyth Barr) and declined it -  resulting in the downward spiral,  Board  resignations, which led to the US investors to demanding their money back -  and a one way track since then . These were the same advisors who made such a hash of the negociations with the US investors that they caused AH to pay a $20M break fee .

Nodoubt in the fullness of time the real story of mismanagement -patch protection - and Hubbards  abuse of everyones trust will see the light of day.

Just a point to remember it

Just a point to remember it was not Forysth Barr that developed the recapitalisation plan in August 2009 that Hubbard and his advisers ignored. It was Forysth Barr who encouraged Hubbard and co to ignore, in favor of their own efforts. Remember the specularly successful capital raising they lead in december 2009 that raised circa $23m that was prior charged?

Forysth Barr is complicit in the failure of SCF and coupled with the recent disclosure that they were buying bonds!! when they were advising the company

At least he put his own money

At least he put his own money into it, and actually stood behind the company, and he would have too, if he wasn't put into statman. This is unlike many other finance companies directors who took out huge dividends, and treated deposits as 'income' rather than what it really was, which was a loan. I think these new accounting standards haven't helped the situation.

Here's a little read I

Here's a little read I stumbled on.....can't reprint any of it (copyright)..

Always nice to have a look back and see who was saying what when...... must be a few of these around.

 

 

And shiver me timbers they were on that quick as a flash. so I'll delete the URL.

Maybe if you were to search Sandy Maier historical some neato tidbits  might crop up.

So once these investors get

So once these investors get back their $1.7 billion where will they invest it - probably back with the mainstream banks which in turn may see mortgage rates come down?

Or will they invest in residential real estate - the safe proven investment that you personally control?

Anons  what you will realise

Anons  what you will realise in time is it wasnt his money  that he put in  it was someone elses mony Hubbard has been leveraged at every level for years - something well known by the Banks - havent you wondered why none of the Banks have any exposure to this mess !!!  Same thing happened with the DFC - whenit finally collapsed NZ Banks had no exposure.

The stat Man has already alluded to this in the Aorangi etc where security has been pledged a number of times !!!

I am not condoning the action of other finance company directors etc but that doesnt make this any less worse !

well guess in a way this will

well guess in a way this will be a boost ,   our GG  SCF  bonds  that are being paid back to us a year early are to reinvested in expanding our business which is going ok, but now is the time to invest for the future...we feel positive and we wont be borrowing off any bank.....

Story updated to include S&P

Story updated to include S&P downgrading SCF to D; Bill English wanting to avoid fire sales; Scales Corp reassuring that it is still in business and comments from Allan Hubbard attacking the government and statutory manager.

cheers

Bernard

I still don't see why I'm

I still don't see why I'm paying these people.

They'd better not start buying rental property.  No way I'm paying taxes to someone so they can become my landlord, to whom I will have to pay rent.  Gen X/Y are getting severly shafted, again!

How about putting it toward your retirement village.  And maybe some trickle down to the waiter who served your dinner.

Not too worry, Jeff. It's

Not too worry, Jeff. It's "NZ$1.6 billion worth of debentures on issue and about 35,000 depositors" that's about $45k each, on average. Not enough to go on a house buying spree with.Some? Maybe, but on average they will still need to borrow to buy, and that seem unlikley at the moment. Even the Govt. can't raise all it's money at its Debt Auction the moment! Rates may be about to rise.....

can't believe the biggest

can't believe the biggest Finance company failure to date, and know one has yet blamed Chris Lee for the collapse.

I blame Chris Lee and every

I blame Chris Lee and every other advisor who continued to pile money into these zombies (thanks Bernard) after Western Bay and Provincial!

The debenture model is seriously flawed so I suggest the finance companies of the future will be funded by securitisation. Look out for the next wave of collateralised debt obligations!!

Vast majority of investors

Vast majority of investors are direct.

 

Disclaimer, I am an advisor, zero exposure to finance cos.

 

But I also blame Chris Lee.

What a scam. Funny how the

What a scam. Funny how the Government can suddenly come up with Billions when cutting costs everywhere else. Reeks of bailing out Nat MP’s who are exposed to the SCF ponzi scheme. This is fraud and I as a taxpayer want my money back.

I sense confllict of interest

I sense confllict of interest on this one.  I back Winston to find it, and if he does and gets charges, he's got my vote

Surely we can get access to those blind trusts

YeeeHaah there's a huge pile

YeeeHaah there's a huge pile of cash ($1.6 billion) that the banks will look forward to depositing - great rate of 3% for 30 to 59 days on offer from Westpac!

Or will they get greedy once again and look for 8% to 10%. Perhaps they will all move into the Kiwi favourite -property investment - bricks and mortar is the one safe bet over the last 30 years - over time it has always gone up - just the occassional dip which is soon recovered.

Not much to be bought with

Not much to be bought with the average $45k per depositor that the 35,000 will get back! Sure some will have the odd mill or two, but that will just lower the average return of funds. It's not much spread acroos 12 months worth of property supply!

Hasn't it dawned on you yet,

Hasn't it dawned on you yet, that the reason that we are in this situation is because NZders have speculated on capital gains from overpriced assets that they ultimaley can't afford? Go off and buy property , by all means, but don't be suprised when it's the next, and now the last, bastion of 'riches for free' that falls.

ohhhh if only i had sold up

ohhhh if only i had sold up everything at the peak of the boom and unwisely and blindly invested in a GG scheme/scam chasing unsecured but Government backed returns . I'd be very happy, especially when i read above some at 40% interest. WTF???

Guess i didn't go to a private school so didn't have the knowledge or crooked connections or insight of times ahead so i should just be happy that the fat lady is singing and they didn't prop it up in AFC fashion and lose the farm, so to speak...

So the choice is - funds off shore to the big four, or make shit loads or profit out of a collapsing finance company.

So much for PI's costing the tax payer money - how about the finance companies.

Winston Peters will need a jumbo bin or self storage facility not a wine box for this puppy....

Winston to the fore with his

Winston to the fore with his winebox... just you wait.

Geesus...nonny that's it...

Geesus...nonny that's it... that's where Alan put the loot  he can't put hand to....it's in a cracker box.

Updated the story with NZ

Updated the story with NZ dollar falling more than 1c to 69.7 USc after the news and poor Treasury bill auction today after the news.

cheers

Bernard

Wow! Good old NZ, rewarding

Wow!

Good old NZ, rewarding the failures!

I hope the depositers of SCF who are getting the $ back are grateful, some of the comments last nite on the blog appeared quite smug.

This is huge, that money could of built a new hospital, prison or special education school

Sorry National, my vote is now undecided.

regards

Under the bailout deposit

Under the bailout deposit guarantee does Hubbard recieve any payment

Bernard I have money coming

Bernard

I have money coming back from SCF.  If you were me - where would you put it now?

Advice appreciated  (from anyone) - thanks

  A quick calc reveals

 

A quick calc reveals Maddoff lost a net NZ$26B of investors money - thats NZ$84 per capita in the US. Hubbards much superior Ponzi scheme has lost $136 per capita - and that is assuming only the $600M is lost.

Add in preference shareholders and other Hubbard companies it could baloon to $1B - about $230 per capita! About 3 times Maddoff feeble effort - crowning Alan Hubbard THE NEW PONZI KING!!!!!