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Treasury has announced Equitable Mortgages Ltd, which has a BB credit rating from Standard and Poor’s with a negative outlook, has received an extended government guarantee until the end of 2011. More detail on the terms of the extended guarantee are on the Treasury website here. Equitable is controlled by the Spencer Family.

The existing government deposit guarantee scheme is due to expire in October this year, but finance companies with BB credit ratings or better are eligible to apply for an extension until the end of next year. Equitable is only the second to be granted an extension after Marac Finance.

Standard and Poor’s latest rating report on Equitable is available here.

The Securities Commission has laid criminal charges against Capital + Merchant Directors Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland, alleging they issued prospectuses that mislead investors over related party lending, cashflow and liquidity. The charges could result in up to 5 years jail or NZ$30,000 in fines, the Securities Commission said.

Capital and Merchant was put into receivership in November 2007 owing 7,000 investors NZ$167 million. Receivers have said none of this will be recovered. See our DeepFreeze list here.

See the full Securities Commission statement below:

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By Bernard Hickey

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Perpetual Trust has announced it has put Strategic Finance into receivership, ending months of uncertainty about whether it might be bought or merged with another finance company. (Adds details, background, writes through)

The property financier that includes former All Black captain Jock Hobbs among its directors owes NZ$417 million to 13,000 investors. This makes it the second biggest finance company receivership after Bridgecorp collapsed in July 2007 owing NZ$458.7 million to 18,000 investors.

It is one of 48 finance companies or investment funds to have collapsed, been liquidated, gone into receivership or to have been put into moratorium since May 2006. Collectively they owe investors around NZ$6.2 billion in 187,000 accounts. See more in this Finance Company deep freeze list here.

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Allied Farmers, which now controls the former Hanover Finance loan to Five Mile Holdings in Queenstown, has announced it has placed David Henderson’s Property Ventures into receivership to recover a NZ$41.5 million loan for 5 Mile that was guaranteed by Property Ventures.

Grant Thornton had been appointed the receiver of Property Ventures, which is owned by Henderson and a number of investors. Property Ventures owns more than 30 subsidiaries, including those linked with Hotel So and the South Of Lichfield entertainment and retail precinct in Christchurch. Henderson’s high profile is linked to his battle during the 1990s with the Inland Revenue Department, which was made into a movie titled “We’re here to help”

Allied Farmers Managing Director Rob Alloway said this would be the first of many such actions involving borrowers who had failed to meet their obligations, adding that the Five Mile loan was now accruing interest at a rate of NZ$23,000 a day.
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Standard and Poor’s has downgraded South Canterbury Finance’s credit rating from BB plus to BB and has warned of the potential for a further downgrade within 3 months that would stop the Timaru-based finance company’s from being included in the government’s extended deposit guarantee scheme from October. (Name corrected in fourth paragraph)

South Canterbury’s credit rating is now at the bare minimum of BB needed for inclusion in the scheme, which would extend the guarantee until the end of 2011. The BB rating is on CreditWatch with negative implications, which means there is a risk of a further downgrade within 3 months.

The downgrade follows South Canterbury Finance’s announcement of NZ$229 million of loan losses and writedowns for the six months to December 31 and the subsequent injection of capital by its founder Allan Hubbard. Standard and Poor’s said the downgrade would have been bigger without the capital injection.

Standard and Poor’s analyst Derryl D’silva told interest.co.nz that the reaction of South Canterbury’s retail debenture holders would be a key factor in the ratings agency’s considerations in the coming three months, as would the ability of South Canterbury Standard and Poor’s to raise capital from other investors.

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By Bernard Hickey

Renowned South Island investor and financier Allan Hubbard has moved to bolster the balance sheet of South Canterbury Finance by injecting his 100% ownership of Helicopters (NZ) and his 64% stake in Scales Corp into South Canterbury in exchange for new South Canterbury shares worth NZ$152.5 million and NZ$10 million in cash.

“We’ve had a shareholder who instead of walking away has said: ‘Yes, I’m going to massively support this company’,” South Canterbury and Southbury Holdings Chief Executive Sandy Maier told interest.co.nz.

“He has increased the equity and his investment in South Canterbury in a very large way,” Maier said.

The injection of equity came as South Canterbury Finance released its half year results showing a NZ$154.9 million net loss after it booked NZ$229 million of losses on asset realisations and further impairments on loans.

The result and the deal announced today also breached two covenants of South Canterbury’s Trust Deed, but South Canterbury said its trustee Trustees Executors had granted a waiver from compliance with these covenants. They related to having no greater than 35% of shareholder funds being to a single party (Helicopters) and the level of equity investments being greater than 100% of shareholder funds.

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