The annual report shows SCF made a net loss after tax credits of NZ$49.6 million, which was revised from a previously reported net loss for the year of NZ$67.8 million initially reported at the end of August.

The release of the audited accounts means SCF can now lodge a new prospectus and investment statement so it can start taking in new money again. Following its credit rating downgrade from Standard and Poor's on August 13 from BBB- to BB+, new investments have not been allotted to debentures and have been held in a trust account controlled by Trustees Executors on behalf of investors. This means the funds have not been lent on by SCF.

The credit rating downgrade meant subscribers of a US$100 million bond placement in the US were able to request a repayment of funds. SCF said in the annual report that discussions were ongoing.

The downgrade also meant SCF's NZ$100 million banking facility came under review after it breached interest coverage covenants. "The banking facility has been placed on a stop draw. This facility may be withdrawn if events leading to the review cannot be addressed satisfactorily," SCF said.

"No request has been made of the banking syndicate nor has any commitment to provide ongoing facilities been made by any syndicate member. The Company has not drawn down any funds under these facilities since they were first entered into by the Company," it said.

Here is the full comment from SCF's directors on its 'going concern' status in its annual report.

Going Concern

The financial statements have been prepared on a going concern basis. The Company has considered its funding and liquidity position, including the following events. Following the credit rating downgrade all new investments and existing depositors reinvestments have been placed in a trust account under the control of Trustees Executors Ltd pending a registration of a Memorandum of Amendments to the registered prospectus which would reflect the above events. On 17 September the company elected to withdraw its prospectus pending registration of a new prospectus incorporating the June 2009 audited accounts. A delay in the registration of the prospectus could have a significant impact on the company's liquidity.

On 13 August 2009 the company's credit rating was downgraded by Standard and Poors to BB+ and on 19 September this was placed on negative watch. The downgrade gives rise of an event of review for both the banking facility and the USPP funding. The banking facility has been placed on a stop draw. This facility may be withdrawn if events leading to the review cannot be addressed satisfactorily. US investors may request repayment of funds and the company is currently in discussion with those investors.

The company is currently looking at a major restructuring. This would see new capital being introduced and the appointment of new independent directors. An announcement is expected in relation to this in mid October.

SCF's total income for the year ended June 30, 2009, was up from its August report by NZ$39.7 million, to NZ$305.7 million, due to the inclusion of NZ$39.7 million of fair value gains on financial assets held for trading.

Meanwhile, expenses were also up by NZ$31.2 million. Bad debts written off were revised from NZ$16.5 million down to NZ$9.8 million (a fall of NZ$6.7 million), although allowance for impairments on advances rose from NZ$49.1 million to NZ$57.7 million (a rise of NZ$8.6 million). Provision for taxation writebacks was also increased by NZ$9.2 million to NZ$13.9 million.

SCF's loss before tax was revised down from NZ$71.9 million in its unaudited accounts to NZ$63.5 million in its audited accounts.

SCF said no related party loans had been written off or forgiven during the year.

However, SCF's impaired and past-due loans rose to NZ$445.9 million or 26% of total gross loans by the end of June, up from NZ$85.2 million or 6% a year earlier.

SCF had NZ$2.1 billion of borrowings at the end of June, including NZ$1.552 billion worth of debentures. Of that, NZ$919 million or 44% of borrowings are due to mature within a year. This is down from 47% due to mature within a year in the last year.

Here is the full media statement from South Canterbury below.

The reduction in the reported loss is mostly due to non-monetary fair value adjustments made under NZ International Financial Reporting Standards. Loan losses and provisions against impaired loans are at a similar level to those included in the Company's preliminary announcement.

Completion of the year end audited financial statements took longer than earlier expected as the Company's auditor was peer-reviewed following a request by the New Zealand Institute of Chartered Accountants.

South Canterbury Finance's Chairman Allan Hubbard acknowledged that the result for the past year was very disappointing in an extremely challenging market.

"While the group had to take account of significant losses and provisions on loans and investments totaling $122.9 million before tax, we were encouraged that the group made an underlying trading profit* of $32.3 million in the year to 30 June."

Following the completion of the audit of its financial statements, the Company is required to give notice pursuant to the notes issued in its US$100 million private placement that it is in breach of certain covenants under the notes. As a consequence, noteholders now have the right by majority vote to require repayment of the notes immediately.

South Canterbury Finance is in discussions with the noteholders seeking a favorable resolution to the position and will make an announcement upon resolution.

As announced earlier, South Canterbury Finance's owner, Southbury Group has appointed Forsyth Barr and Harmos Horton Lusk as advisors to assist in the restructuring of the group and recapitalisation of South Canterbury Finance.

"Completion of the audited financial statements has been a key step in our restructuring plans. We look forward to announcing details of our plans and the appointment of new independent directors as soon as we are able to," Mr Hubbard said.

* Underlying trading profit equals net profit before tax excluding impairments on loan advances, gains and losses on investments and intangible assets, and excluding foreign exchange gains and losses.

Here is the full annual report below. We welcome any further insights or comments from readers below. We will update with more as we see it.

SCF annual report, year ended June 30, 2009