Potential bondholder windfall in SCF takeover

Potential bondholder windfall in SCF takeover

Potential white knights for South Canterbury Finance (SCF) could be forced to shell out about NZ$250 million to bond holders after taking control of the troubled finance company as well as injecting somewhere in the vicinity of NZ$180 million of much needed equity.

SCF issued NZ$125 million worth of five-year bonds in December 2007 and a further NZ$125 million in a three-year offer in June 2008.

The bonds have a put option whereby trustee Trustees Executors is tasked with convening a bondholder meeting if control of the company changes hands. At the meeting the bondholders can decide, by extraordinary resolution, to force SCF to repurchase their bonds. The price would be equal to the principal amount of the bonds plus accrued interest.

The five-year bonds, which mature in 2012 after the extended Crown retail deposit guarantee scheme ends on December 31, 2011, pay 10.43% per annum and the three-year bonds, due to mature in June 2011, pay at least 10.5%.

SCF chief executive Sandy Maier told interest.co.nz the possible repurchase of the bonds is being considered in talks with parties SCF is talking to about sinking fresh equity into the business.

“It is being taken into account and it’s not an insignificant factor in the whole structure,” Maier said.

Also being taken into consideration were covenants in place around a NZ$100 million loan to SCF from the George Kerr led Pyne Gould Corporation subsidiary Torchlight that runs until November. Torchlight has a prior charge on up to NZ$151 million, or 7.2%, of SCF's assets.

Maier says SCF is talking to several parties about them potentially injecting the equity into the finance company needed to bring SCF back into line with its trust deed. Trustees Executors has granted a waiver until August 31.

Allan Hubbard, owner of SCF's parent company Southbury Corporation, is under government enforced statutory management. SCF is covered by the initial Crown retail deposit guarantee scheme which runs until October 12 and the extended scheme.

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