South Canterbury Finance faces billion dollar liquidity risk

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South Canterbury Finance faces a billion dollar liquidity risk this year and it is banking on getting accepted into the government's extended guarantee scheme to help ease some of the strain.

Wednesday, February 10th 2010, 9:58PM

by Paul McBeth

The finance company controlled by Timaru businessman Allan Hubbard has some $491.2 million to be repaid by the end of June and a further $650.5 million of borrowings falling due before the expiry of the government's retail deposit guarantee scheme in October, along with another US$17.5 million owed to noteholders under its private placement with American investors due by the end of March. It expects the second leg of its restructuring through an offer of stock and deposits, along with asset sales, to improve its liquidity position.

"There is a risk that South Canterbury Finance may not be able to raise the money required for its lending and investment activities, nor the funding required to repay its indebtedness, from the issue of debt securities in the ordinary course of its business or from external funding sources such as banks. This is particularly the case if it is not accepted into the Crown's extended deposit guarantee scheme," the investment statement said.

As at February 10, the company had cash on deposit of $79 million and realisable assets of $12 million, according to its latest investment statement. The company's loan book was about $1.7 billion before impairments as at June 30.

Still, the finance company was successful in attracting new deposits in the second half of 2009, with about 55% of investors rolling over their money after it released a new prospectus in October. South Canterbury has boosted its deposits to $34.9 million at December 31 from $29.17 million as at June 30.

Earlier this month South Canterbury Finance announced it expects to post a first-half loss for the six months through December as it is forced to further writedown the value of its investments while increasing its provisions for bad loans.

The company had its $100 million banking facility cancelled last year, and has fully drawn down on a $75 million facility with George Kerr's New Zealand Credit Fund, which was used to repay American investors. It may revisit banking facilities once it has completed its restructuring and recapitalisation plan.

SCF's new investment statement

Amendments to Investment Statement

Paul is a staff writer for Good Returns based in Wellington.

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