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Bidders looking at buying up to 100% of Allan Hubbard's South Canterbury Finance

Bidders looking at buying up to 100% of Allan Hubbard's South Canterbury Finance

Bidders may buy up to 100% of Hubbard's South Canterbury Finance

Allan Hubbard may agree to sell up to 100% of his holding in South Canterbury Finance by as early as August as the Timaru-based finance company tries to find a major new equity investor to ensure its long term survival.

South Canterbury Finance Chief Executive Sandy Maier told in a Double Shot interview that Hubbard formally stepped down as a director and chairman on Friday and continues in his new role as President for Life. South Canterbury Finance announced on May 31 that Hubbard would step down down, but did not give a specific date for when he would leave.

"We have said for some time that we are on the search for a significant amount of equity and really what that means is Allan selling down his 100% ownership through the parent company, so when that happens that's an Allan decision," Maier said in the interview (around 4 mins 30 secs onwards)

"We asked Allan to step away from the day to day, get the succession plan going, hand over to others in terms of the routine stuff and focus on the two big issues of liquidity and finding an investor," he said.

"Our sense has been that that is the logical next step is to get a good underpinning of new capital and the market has speculated widely on that being something that's desired and Allan is absorbing that message and is focusing on it. I've got nothing to announce today but that process is under way and has been for some time," he said.

Maier said Hubbard continued to be working 7 days a week, but had stepped back from day to day operations and was now focused on short term cashflow issues and bringing in a new equity investor.

South Canterbury's credit rating was downgraded to B plus by Standard and Poor's on May 31 and Pyne Gould Corp's Torchlight lent a further NZ$25 million to South Canterbury directly. This lifts the first ranking loan from George Kerr's Torchlight to NZ$100 million or 7.2% of its assets. South Canterbury received a waiver from its trustee for this extra loan up until August 31. It has no room room under this waiver for the first ranking loan to borrow more from Torchlight.

Maier said this August 31 deadline was important as a milestone for South Canterbury in its hunt for a new equity investor.

"We're pretty keen on doing this. It's not a many years from now vague thing. We've got some pretty clear targets. We've got a mandate running and we've got people in due diligence and it's all happening," he said.

Maier said he doubted Hubbard would sell the full 100% stake. "I think Allan will want to retain involvement in the company and retain upside in it. The exact nature depends on what people offer."

Maier said more than one party was in due diligence. As many as 14 entities started in February expressing interest in South Canterbury Finance, he said, adding it was a mix of banks and other players -- "largely other players."

Rollover task

Meanwhile, South Canterbury is busy trying to convince investors who have debentures due to expire before the end of the original deposit guarantee scheme on October 12 to roll over those investments early. South Canterbury had sent out 20,000 letters to its debenture investors and had received around 7,000 letters with around two thirds of those had decided to roll over, bringing in around NZ$180 million.

Around NZ$300 million was due to mature on October 11 and that number had reduced significantly in recent weeks, he said.

"The response rate is very high, very positive, higher than even the average for rolling forward so all those are good signs, but we have to take each day, each week as a bit of a mystery," Maier said.

Asked about the need to roll over a further NZ$400 million of investments by October, he said: "It's far from unmanageable and we're much further ahead than where we'd thought we'd be."

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Have a watch of the video, but my understanding is that a bank or another player would invest fresh cash in new South Canterbury shares, effectively watering down Hubbard's ownership from the current 100%.

In theory, he would retain a small stake or even sell out completely. David Hilary's point is good though. It's hard to know how much Hubbard's current equity in South Canterbury is worth if he were to sell it.

The issue will be how much dilution he accepts.




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