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Provincial talks to South Canterbury

Troubled-finance company Provincial Finance may sell part of its loan book to South Canterbury Finance to raise cash needed to restructure trading.

Tuesday, May 23rd 2006, 1:33PM
Provincial withdrew its prospectus from the market and stopped accepting new deposits a couple of weeks ago when it announced it will be reporting a loss in the financial year to March 31.

Chairman David Lyall says the directors determined that the company needed to prepare a new prospectus and investment statement to take account of the results.

“The results will show a loss, and the directors have decided that the company should not take in further funds until we are in a position to explain this to investors, after the results have been independently verified by our auditors.”

Lyall says the loss arises from car loan lending that the company engaged in during 2003-2005.

Lyall has confirmed Provincial has had talks with South Canterbury Finance owner Allan Hubbard.

He says that selling some assets to SCF is only one option available to Provincial.

In the past fortnight Provincial has axed staff. It has pulled out of used car lending in the North Island after being hit by a mounting level of defaulting loans.

While Provincial specialised in car finance it also has $42 million of commercial property loans on its books.

These could be sold to provide the cash to cover the gaps created elsewhere. However such a deal with South Canterbury would be a bitter pill as Provincial has said commercial property is precisely the area where it wants to focus if restructuring succeeds.

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