The government expects to recoup about another NZ$285 mln for taxpayers from the South Canterbury Finance receivership

The government expects to recoup about another NZ$285 mln for taxpayers from the South Canterbury Finance receivership

By Gareth Vaughan

The government expects to recoup about another NZ$285 million from the South Canterbury Finance (SCF) receivership after receiver McGrathNicol disclosed yesterday that it had repaid NZ$395 million, or one quarter, of the taxpayers' NZ$1.58 billion outlay on the failed lender.

That would see about NZ$680 million recovered in total, about 43% of the taxpayers' outlay leaving a loss of about NZ$900 million.

McGrathNicol's latest receiver's report, out yesterday, showed NZ$345 million was repaid to the Crown in the six months from March to August, plus an additional NZ$50 million on October 7. And back in February, they repaid a NZ$175 million Crown loan that was provided to repay SCF's prior charge holders, including Pyne Gould Corporation's Torchlight.

The previously Allan Hubbard controlled SCF collapsed into receivership on August 31 last year triggering a NZ$1.58 billion taxpayer funded payout to 35,000 of the company’s investors under the Crown retail deposit guarantee scheme.

McGrathNicol managing partner Kerryn Downey told interest.co.nz he wouldn't comment on how much more money McGrathNicol expects to recoup for taxpayers because doing so could place a value on the remaining SCF assets for sale and therefore be prejudicial to the receiver's sales process.

However, at the time of SCF's receivership the government estimated a net cost to the taxpayer of about NZ$600 million. Then in April the government revised its expected overall bill from the Crown retail deposit guarantee scheme upwards by NZ$331 million with the bulk of this - up to NZ$300 million - coming from SCF related party lending. That, therefore, suggests the government expects the SCF receivership to cost the taxpayer about NZ$900 million leaving the total return from the receivership at about NZ$680 million.

Given the Crown has been repaid NZ$395 million thus far, that suggests about another NZ$285 million to come. Finance Minister Bill English said yesterday the recovery from the SCF receivership was on track to meet Treasury's forecasts.

English also said that, in a move to try and save money,  the government was setting up a new company to manage the realisation of about NZ$350 million of of assets in six finance companies that failed whilst carrying the Crown guarantee including SCF. However, it's not yet clear which SCF assets will be overseen by the new company.

SCF's unsold assets and remaining interests include about 300 non-performing loans with a book value of NZ$470 million prior to provisioning, SCF's 33.6% stake in Fonterra's biggest supplier Dairy Holdings, the 64 hectare Belfast Park on the outskirts of Christchurch which is available for residential development, other equity investments, loans to subsidiaries, and related party loans including to SCF's parents Southbury Corporation and Southbury Group, the run-off administration of Southbury Insurance, and investigations of transactions pre-dating the receiver's appointment and potential litigation against various parties.

Downey said McGrathNicol had hired Colliers to run an international sales process for Belfast Park, which would take some months to progress. SCF's other investments were "diverse in nature" and include forestry cutting rights. As for the Dairy Holdings stake, the sale of which is subject to a court battle with Dairy Holdings' 16.66% shareholders Colin and Dale Armer, Downey said he was confident a solution would be reached "that's going to make sense to all parties."

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6 Comments

Colin Riden posted this,this morning, I think he asks good questions that we should expect answers to.

 

by Colin Riden | 28 Oct 11, 10:49am

2

 

Taxpayers look likely to take a $1 billion bath on South Canterbury Finance, after figures released by receivers and the government yesterday indicated its latest financial position.

http://www.stuff.co.nz/business/5864950/Ugly-numbers-on-South-Canterbury...

A $1 billion taxpayer bath focuses the mind a little more sharply than stating the receiver has reimbursed the government to the tune of NZ$395 million.

What I want to know - and in a fully functioning democracy I believe the taxpayer is entitled to know, is:

a) Who were the major beneficiaries of the SCF bailout? To which individuals/companies did the government pay more than $5 million each?

b) Were those who were paid really entitled to the money, or were different rules applied to SCF because of its bondholders' connections?

And as long as a) & b) above are not answered and/or there is no public enquiry, the perception of NZ having a systemic lack of integrity/corruption will remain.     

For a) above we need a list of SCF's major debentureholders and bondholders. As for b) as far as I can tell the rules of the Crown retail deposit scheme, such as they were, were followed.

That said, Treasury did introduce this open slather policy after SCF failed - http://www.interest.co.nz/news/50538/treasury-will-now-repay-all-deposit...

I'll second that, sounds like about 6-7% of my tax last year was wasted paying out investors, who are rewarded for risk by interest rates I thought.

typo: That would see about NZ$680 million recovered in total, about 43% of the taxpayers' NZ$1.58 million outlay on SCF leaving a loss of about NZ$900 million.

Thanks!

Here's a Colliers promotion for Belfast Park. Bids due November 18 and sale targeted by Christmas - http://www.colliers.co.nz/15607/