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South Canterbury CEO Lachie McLeod leaving to ‘pursue farming interests’ (Update 2)
November 26th, 2009South Canterbury Finance Chairman Allan Hubbard has told the troubled finance company’s annual meeting in Timaru today that Chief Executive Lachie McLeod will leave the company to pursue farming interests and be replaced on an interim basis by Timaru chartered accountant Nigel Gormack. (Update 3 includes comments from McLeod).
South Canterbury said McLeod would finish on November 30 and be succeeded by Gormack (pictured left), who is a fellow director of Hubbard in Hubbard Churcher Trust Management Ltd, Companies Office records show. South Canterbury said it would look for a new permanent CEO to lead it next year when the group would be recapitalised, although it gave no new details of when that might be.
“The last 18 months have been particularly turbulent for the finance industry with pressures unleashed by the global financial crisis, new regulations and the difficult trading environment,” McLeod said in a statement released by South Canterbury.
“South Canterbury Finance is now on a more stable footing with a diversified portfolio of assets that will underpin its future. This is the right time to find and establish a new Chief Executive who can oversee the recapitalisation that will take place next year, position for the implementation of the new regulatory framework and meet the new challenges the industry will face.”
McLeod will continue to work with South Canterbury Finance as a consultant until a new Chief Executive is appointed. McLeod would then work as a consultant to the other business interests of Hubbard.
Hubbard said he fully understood the reasons for McLeod’s decision to resign.
“Lachie has provided leadership to guide the Company through this difficult period and worked tirelessly to achieve a positive outcome for investors, shareholders and staff. On behalf of the directors I thank him for all he has done.”
McLeod said he would be focusing on his family and farming interests when his day to day involvement with the group ended.
The Timaru Herald reported the following from the meeting.
The group, controlled by veteran Timaru businessman Hubbard, is looking to raise more than $100 million as it strives to get back on an even keel and reduce exposure to troubled property loans.
Hubbard, also controlling shareholder of the Southbury Group, said on October 31 SCF and Southbury would probably announce restructure and recapitalisation plans by the middle or end of November.
Southbury would probably float on the sharemarket in February-March 2010. The float would involve the entities that made up Southbury, and possibly also two other companies. Broker Forsyth Barr is helping organise the float details, though how much had to be raised was yet to be decided.
The Southbury Group components included Dairy Holdings and Helicopters NZ. The group also includes Scales Corp.
Tags: Allan Hubbard, Lachie McLeod, Nigel Gormack, South Canterbury Finance, Torchlight
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November 26th, 2009 at 4:34 pm
Guess thats one way of getting rid of $20m of ‘related party’ loans!! Trouble is , how will McLeod ever pay this back? Thats alot of sheep to shear at 40c each!!
November 26th, 2009 at 4:50 pm
Not good to lose the CEO a few months before Southbury is wanting to float.
Those with funds in SCF maturing after the Govt guarantee expires on (11th ?) Oct 2010 might start getting very nervous….
Alan.
November 26th, 2009 at 5:11 pm
Boris the Frog
Many thanks for your insights, but unfortunately we can’t prove them and can’t leave them up.
Cheers
Bernard
November 26th, 2009 at 5:41 pm
Bernard,
Do a company office search on Gormack… director of Hubbard Churcher Trust Management for example?? I could go on…
And McLoed – ask anyone who has had dealing with him… v uninmpressive…
November 26th, 2009 at 6:38 pm
Is this the start of the end for SCF or just another bolter from the team.Why would anyone want to go farming in the current economic climate,unless there is more to this than meets the eye.Anyone with cash in SCF would have reason to be a tad nervous.
November 26th, 2009 at 6:44 pm
What happened to freedom of speech? Each poster here submits a contact email address and therefore is accountable for their comments should a court order discovery.
The site owner has NO exposure whatsoever for bloggers comments, legally.
Moderation on blogs like this should be limited to profanity and abuse imho!
Chip
November 26th, 2009 at 7:44 pm
Chip.
Agreed.
November 26th, 2009 at 8:52 pm
well bernard allows contributions from all and sundry without favour and lets us pretend that we have something important to say,that doesnt mean he should let numpties loose to libel allan hubbard,he might be old but that doesnt mean he hasnt got any teeth!
November 26th, 2009 at 8:57 pm
It will be interesting to read Chris Lee’s spin on this announcement!
November 26th, 2009 at 9:09 pm
Much more fun washing the shite out the shed, than pushing it up Hill… Good on ya Lachie!
November 26th, 2009 at 9:46 pm
Worst possible timing…certainly appears a team they are no more.
November 26th, 2009 at 9:52 pm
Chip
“The site owner has NO exposure whatsoever for bloggers comments, legally.”
If only that were true. We are completely responsible for whatever someone else says on the blog in the comments. There may be some defence in the few moments between when you’ve hit publish and I read it in that I haven’t acquiesced to the publication.
Once I read it and choose to either leave it up or take it down, it’s as if we have said it.
I’ve been around the media for 20 years and have seen my fair share of legal complaints and amazing defamation suits.
FYI here
http://www.findlaw.com/12international/countries/nz/articles/852.html
cheers
Bernard
November 26th, 2009 at 9:54 pm
Allan Hubbard is the man behind South Canterbury Finance and the man that Mums and Dads are trusting. Not Lachie McLeod.
cheers
Bernard
November 26th, 2009 at 10:35 pm
Good call Bernard,
Allan Hubbard will be playing out a strategy. I’m sure time will tell and any bleating on these blogs won’t speed him up (if indeed he ever bothered to listen)
Note the surge in SCFHA securities on the NZDX today…
November 27th, 2009 at 6:32 am
Southbury wanting to float? I don’t think so. Stuart Nattrass is a director of Southbury, and up until recently a director of Fonterra, bowing out accusing shareholders of being ’social creditors’ (whatever that is suppose to mean in reference to members of a co-operative), and bemoaning the state of calfshed meetings and provincial motels.
Having being a director for a large co-op for the last 6 years (“a 24/7 job”) which vehemently resisted a ‘partial’ float, you would think there would be some opposition within southbury group for listing.
November 27th, 2009 at 6:40 am
Apologies, my source lists Stuart Nattrass as being a shareholder of Southbury Group Ltd
November 27th, 2009 at 7:43 am
Old Father Hubbard has cleaned out the cowshed at last. Interesting to watch what happens next. And yes Chip, do $20m of loans go with the CEO job every time? They’re now unrelated-party loans, so that’s okay, move on, nothing to see here.
November 27th, 2009 at 8:03 am
South Canterbury Finance CEO Lachie McLeod ‘required to take risks that were not appropriate’ according to Chris Lee
See http://davidhillary.blogspot.com/2009/11/south-canterbury-finance-ceo-lachie.html
November 27th, 2009 at 8:20 am
# Bernard Hickey Says:
November 26th, 2009 at 9:54 pm
Allan Hubbard is the man behind South Canterbury Finance and the man that Mums and Dads are trusting. Not Lachie McLeod.
cheers
Bernard
The 2010 Government Guarantee is all this investor is trusting:)
November 27th, 2009 at 8:50 am
Can someone please explain how Lachie McLeod’s resignation removes his loans from being ‘related party’?
November 27th, 2009 at 8:58 am
If South Canterbury is underwater and needs $100m to stay afloat, well that’s serious. McLatchie’s departure is hardly a thumbs up for Mom and Dad throwing more into the black hole of yet another New Zealand Finance Company. I would like to know today’s book value of their assets.
November 27th, 2009 at 9:09 am
Personally I would put the odds of SCF triggering a government guarantee in the next 12 months at more than 80%.
I think Treasury believe the odds are pretty damn high as well – that why they have made provisions against the guarantee of $850m.
I read elsewhere that SCF had pulled in $70m with the new prospectus – sounds a lot, but its not really given they were offering 8% with a government guarantee on their ’till guarantee expiration’ debenture. I reckon its enough to keep them afloat till early next year (and hope something good comes along)………
November 27th, 2009 at 9:17 am
the loan to the ex CEO is still a related party loan, since the guy holds shares in the parent company, I figure.
November 27th, 2009 at 9:17 am
@Boris and Chip – Get your own blog and test the waters on libel applications. This platform is great, precisely because of the freedom we have to share points of view.
November 27th, 2009 at 9:29 am
andyh – I agree and isn’t nice for SCF when the current GG is free (courtesy of the NZ taxpayer). I suppose that this is one of the benefits of being able to summon the PM to Timaru.
November 27th, 2009 at 9:35 am
Yes it would be intriguing if this was just a ’strategic’ removal of the CEO to make the $20m of related party loans ‘disappear’.
Stranger things have been known to happen in good ol’Aotearoa……
The fact that such thoughts even occur says everything you need to know about the trust that we hold Finance companies in.
November 27th, 2009 at 11:03 am
I hope English pulls the plug on backstopping Finance Companies, period. Better to clear out the deadwood and help investors by encouraging them to exercise better risk/reward in the instruments they choose. Aussie Banks may be usurious, but anything is better than investing in the lifestyles of New Zealand’s entitled through Ponzi schemes.
November 27th, 2009 at 11:52 am
Fantastick, Nigel Gormack is really on the ball (not) – it was just last week at a National Bank seminar he was talking about our current top tax rate being 39%!! (Top tax rate is actually 38% for anyone who doesn’t know.)
SCF is gurgling terminally
November 27th, 2009 at 1:32 pm
Hey, let’s get real here. McLeod was never officer material – he was there to do what allan “my cupboard is bare” hubbard told him. just keep those related party loans flowing please. so he did. he was rewarded with a loan to buy shares in Southbury. in the first nanosecond of the new directors’ regime (who’ve been given a crown indemnity) he’s marched out and a patsy put in while they get someone with a death wish organised for the job. already they’ve found another $50m in crap loans in the book. just as people thought the titanic was unsinkable they think scf can’t fail. the idea is so scary it can’t happen surely. the only thing between scf and statutory management is bayliss and co. let us pray for them. those with a black sense of humour will love the pic in the press today of a dumbass shareholder giving hubbard a personal plate SCFAAA. make that SCFB- negative when S&P announce their next rating.
November 27th, 2009 at 2:18 pm
Chris,
Where are you seeing that South Canterbury have found another NZ$50 million in impaired loans.
It’s worth saying too your comments above are honestly held opinion.
Let’s puts facts around the rhetoric.
Can you also be more specific about this:
“The only thing between scf and statutory management is bayliss and co” I haven’t seen anything more to justify this.
cheers.
Bernard
November 27th, 2009 at 2:46 pm
i don’t engage in rhetoric. it is indeed my honestly held opinion that further impaired loans have been discovered in the loan book. my source is from within the company. while the three directors have been ostensibly appointed by hubbard, they first obtained a crown indemnity so that they could not be personally sued over any decisions they might make. perhaps you could ask one of the directors to confirm this? despite the undoubted combined skills of the three directors (three of the most experienced in nz) in my view scf has reached the stage where the only sensible solution is statutory management (aka chapter 11 in the us). S&P are about to downgrade once again, the southbury rescue ipo will face extreme difficulty, there’s real doubt that the crown guarantee can be renewed even if treasury wanted to. there’ll be a massive outflow of funds if it’s not renewed. including those trustees etc at risk because of no investment grade.
November 27th, 2009 at 2:52 pm
Put facts around rhetoric Bernard?! Surely not!
You never answered my request to provide facts that would back up your comment “The net result will be more debt” regarding Fonterra’s restructure proposal. Ever since then I’ve regarded this site as being mainly rhetoric nonsense!!
Let’s see you ‘put facts around the rhetoric’ regarding your comment, please.
November 27th, 2009 at 3:02 pm
TumTeTum
My point on the Fonterra restructure is that not all of the Fonterra capital raising will be used to repay Fonterra’s debt. Some will go to expanding its business and potentially subsidising this year’s payout.
The net result for the industry, including both farmers and Fonterra, will be higher debt. That’s because farmers will not be selling their own assets or using their own cash to buy the shares. They are already going to their banks to borrow the money.
Fonterra and the industry needs more equity, not debt.
cheers
Bernard
November 27th, 2009 at 3:08 pm
Re SCF credit rating, see:
What Credit Rating for a Financial Institution that ran out of Cash Last Week?
UPDATED (23 Nov)
http://davidhillary.blogspot.com/2009/10/what-credit-rating-for-financial.html
and
South Canterbury Finance Credit Rating Timeline
http://davidhillary.blogspot.com/2009/11/south-canterbury-finance-credit-rating.html
November 27th, 2009 at 3:20 pm
Bernard
You said: “That’s because farmers will not be selling their own assets or using their own cash to buy the shares. They are already going to their banks to borrow the money.”
That is where you are wrong Bernard, and that is the point I was trying to make. You assume that every single dairy farmer in NZ has debt, which is just totally incorrect. There are dairy farmers who have been debt free for years, and others who got debt free in the recent boom. Their ‘dry shares’ will be purchased with real money from a real bank account, creating real equity for Fonterra.
This is the same as some people who post on this site seem to think every rental property has a mortgage against it. I was talking to a guy last week who had 10 rental properties, and didn’t have a stitch of debt!!
More facts needed, less rhetoric please, or you will lose my interest.
November 27th, 2009 at 3:40 pm
debtwise dairy farmers are in three categories. the first are those who’ve been dairying for 20 years or more and have little or no debt. in good times they may have bought more land but even so are debt-free. then there’s a group who came in 10-15years ago. they have prudent levels of debt and a low price is not too much a worry. then there’s the five years or less people. they borrowed to the max but shd have budgetted on a conservative price in terms of borrowing. many didn’t. it’s those who are in trouble (reference hubbard’s dairy holdings ltd).
November 27th, 2009 at 3:46 pm
Not hard to see $50m of new impaired loans by simply looking at the level of property development loans on SCF books, and the continuing asset value ‘tanking’ in that sector , not to mention the lack of financing alternatives.
As each capitalised interest loan falls due , most will be going ‘bad’ imho .. simple reality , I do not know of anyone in the property development or banking sectors that holds a differing view to this!
Chip
November 27th, 2009 at 4:06 pm
TumTeTum
Many thanks. Fair enough. Let’s have a look at what is happening with agricultural debt, which we do have figures for. Agricultural debt, which most people agree is about two thirds dairy debt, has risen NZ$4.247 billion in the last year to October to NZ$46.9 billon, according to data in C5 of the RBNZ series. Dairy debt has more than doubled to NZ$31 billion in the last 5 years while Fonterra revenues have risen 30% to NZ$16 billion. http://rbnz.govt.nz/statistics/monfin/RegBanksNBLIs/3822930.html
Assuming two thirds of that growth is dairy debt, which is probably conservative then dairy debt rose around NZ$2.8 billion last year to NZ$31 billion. Those figures would include lending to Fonterra of around NZ$9 billion. Fonterra’s annual report (page 42 of 104 here) shows it had debt of around NZ$9.3 billion at the end of July this year. http://www.fonterra.com/wps/wcm/connect/9704ee804009ef6aa916ad21d66da0e1/2009+Annual+Report_FINAL.pdf?MOD=AJPERES
My argument is that the overall industry’s debt is likely to rise because of this capital raising, given that even without the capital raising it has risen sharply.
You are right of course that many farmers have no debt. But do they have that cash sitting in their bank accounts? Or will even the debt free ones choose to leverage up a bit to buy those shares? My banking sources say they are doing that right now.
And is any cash drawdown enough to offset the extra debt to be taken on by the big new farmers and all those indebted from acquisition sprees of neighbours?
My point is that overall debt for the industry is likely to rise, not fall because of this capital restructure.
Do you think it’s sustainable that an industry’s revenues have risen 30% in the last 5 years while its debt has risen more than 100%.
cheers
Bernard
November 27th, 2009 at 4:11 pm
Bernard
My belief is that Fonterra’s debt is not included in the farm debt figures.
Peter R has some good info on dairy and Fonterra
http://www.agprodecon.org/node/36
November 27th, 2009 at 4:14 pm
Bernard, I think you are saying that dairy debt will rise not because of the capital raising, but in spite of it.
November 27th, 2009 at 4:36 pm
I have wasted enough time on this, but I would like to agree that the rise in debt relative to income was not sustainable. These figures are distorted however by the large new dairy farms and the Crafar types who just went crazy.
I still struggle to see how it won’t help the total equity situation. For the umpteenth time: yes there are dairy farmers with cash in the bank.
The big overall figures seem to have blinded you to the fact that there are still some very conservative farmers in NZ, who don’t loan money for anything.
I would suggest you talk to some of the specialist farm accountants – they see balance sheets that you are not allowing for in your calculations.
November 27th, 2009 at 4:47 pm
David,
I’m saying the debt will rise anyway, but the restructure will accelerate it.
TumTeTum
Many thanks for your interest. I enjoy a good debate.
I’d love to see figures, if you have them, on what proportion of production is likely to use spare cash or will sell assets to buy the extra shares rather than take on extra debt. I’ll look out for them too.
cheers
Bernard
November 27th, 2009 at 4:51 pm
Bernard
Have you got todays farm debt figures yet?
November 27th, 2009 at 5:35 pm
What I make of McLeods recent life choices:
God damn pilgrims, looks like the law might be thinking about poking its nose in the wildwest, Im taking my booty and gonna get on outa here. Hell, I’ll have to change those tickets to Dubai, second thoughts the central bankers might need a good receiver?
November 27th, 2009 at 6:01 pm
whilst there is alot of debate about the debt on dairy farms, comentators are failing to note
1 farmers have worked hard to drop farm working expenses by around 30% this season in Canterbury
2 farm income has moved up by 30% on original budgets
3 this means that there are farmers with cash in the current account which is not normal at this time of the year. This is usually the time when overdrafts are at the highest
4 Farmers have been getting Tax refunds at the moment but my accountant is saying that farmers should be revisiting their tax situation as they might need to start stumping up with more
I farm in central Canterbury and i do not know of anyone that is looking at buying dry shares and nor do our bankers.
I think the rise in dairy farm debt will slow right down. Alot of the recent rise was associated with capitilizing overdrafts in June and bankers are not that busy at the moment. Sure there will be farmers that have to do a bit of balance sheet restructuring as in all business sectors
November 27th, 2009 at 6:06 pm
sorry – just noted that there is another chris so will change my above comment about dairying from chris to cows2
November 27th, 2009 at 6:15 pm
AndrewJ
RBNZ figures out today show farm lending fell NZ$297 million to NZ$46.934 billion in October from September, but is up 9.9% from NZ$42.687 billion a year ago.
Here’s the full stats.
http://rbnz.govt.nz/statistics/monfin/c5/data.html
cheers
Bernard
November 27th, 2009 at 6:59 pm
As i said Bernard ” the rise in farm debt is going to slow down”
Dairy Farmers that are looking at buying dry shares will either have cash in the bank or a lazy Balance Sheet. Rural Lenders are not going to allow an increase in term lending to buy dry shares if they do not have at least 55-60% equity. The new rules are lending to approx $15KG/milksolids so as i say, that is going to count alot of farmers out in buying dry shares.
November 27th, 2009 at 8:30 pm
Those figures do not include lending to Fonterra. Banks have little exposure to Fonterra – only $800 odd million or about half that of a year ago. The result probably of issuing close to $800 million of retail bonds.
Fonterra’s borrowings are now under $6 billion, mostly offshore notes. The balance of your $9 billion are liabilities to creditors and suppliers.
Fonterra’s debt to banks would be included under the food manufacturing sector. Claims in the agriculture sector are predominately for farm debt – two thirds dairying.
November 27th, 2009 at 8:42 pm
cows2.
I agree, but don’t understand why they might still be considering buying dry shares. That is something you would want other farmers to do, but avoid yourself.
November 27th, 2009 at 9:08 pm
PeterR
I agree, I wont be unless there is a change in the fundamentals that leads to the yeild going and staying in double figures or the value of the shares going up. Might be a case of wait and see.Anyway I would think if a farmer has spare cash either debt reduction or a bit diversification away from Ag would be the better alternative at the moment.
The comment by Fonterra today regarding the potential of a fall in the milk price next year is interesting. As the lower milk price will lead to an increase in the value added part of the business, thus resulting in better earnings for holders of wet shares. Is this just a comment to increase the apetite of farmers to buy these shares or just a reflection of the fragile monetary (Dubai!) situation the world still is in.
November 27th, 2009 at 9:22 pm
cows2:
I suspect there may be some pressure on Fonterra from their bullish payout forecasts, and this is just a start in softening up shareholders for disappointments to come.
November 29th, 2009 at 1:40 pm
Oh the stories I could tell about goings on a SCF… well it seems that will all have to remain hidden…
But would I trust Hubbard?
Nup.
remember folks… that’s just an opinion.
November 29th, 2009 at 2:56 pm
Good debate at
http://www.sharetrader.co.nz/showthread.php?t=2754&page=28
on SCF ,,,, the sharetrader site never deletes or moderates posts (imho) , despite some fairly ‘grunty’ accusations and revelations being posted.
Worth reading the SCF thread on sharetrader back to mid June or so , most of what may have been considered ’slanderous / libelous’ by this site has proven to be 100% correct .
Chip
November 30th, 2009 at 10:37 am
while there is not much news about SCf other than the sagas of its borrower’s failed projects being sorted out, I’ve put up a poll on the next big hurdle for SCF: creditwatch — what credit rating will they get?
see http://davidhillary.blogspot.com/2009/11/credit-rating-countdown-and-poll.html