Standard & Poor’s, which had an investment grade rating on South Canterbury Finance (SCF) when it entered the Crown retail deposit guarantee scheme in 2008 and whose BB rating helped enable SCF to enter the extended scheme, says it’s watching developments around the company with interest.
The Serious Fraud Office (SFO) last week revealed it was investigating a handful of SCF related party transactions dating from 2005 to 2009. And SFO chief executive Adam Feeley told interest.co.nz if the SFO concludes SCF did commit fraud, Treasury – as the Government’s supervisor of the retail deposit guarantee schemes, may be viewed as a victim. SCF collapsed into receivership on August 31 triggering a NZ$1.6 billion taxpayer funded payout under the retail deposit guarantee scheme.
SCF had a BBB- investment grade rating from S&P when it entered the initial guarantee scheme in late 2008 and a BB rating, the minimum required for acceptance into the extended scheme, when it was approved on April 1 this year.
Asked whether the international credit rating agency had any concerns that it might have been misled by SCF when carrying out its ratings work on the finance company, an S&P spokeswoman said the SCF developments were being watched with interest.
'(But) it's not appropriate for us to speculate on the outcome of the SFO investigation, and at this stage fraud hasn't been proven," she said.
On May 28, less than two months after SCF was approved for the extended guarantee which started on October 12 nearly a month and a half after SCF's receivership, S&P downgraded the lender's long-term credit rating two notches to B+ from BB citing liquidity problems. This was the same day SCF announced its majority owner Allan Hubbard, placed under government imposed statutory management just under a month later on June 20, would step down as chairman and a director.
The SFO is undertaking a separate investigation of other Hubbard associated entities, Aorangi Securities and Hubbard Management Funds, with a decision on whether charges are laid or the investigation closed due within a few weeks.
* This article was first published in our email for paid subscribers earlier today.See here for more details and to subscribe.