SCF’s long history blurred in an instant

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[BLOG] South Canterbury Finance’s demise, and this may seem odd, was a little bit of a surprise. Sure there were the regular commentary crowd baying for a receivership. They are a bit like the peasants in the old days wanting to see people hung, drawn and quartered, a beheading or simply someone being thrown to the tigers. Well they got their head this time.

Thursday, September 2nd 2010, 12:18PM 3 Comments

Many thought the company was too big to fail. That's now history the receivers have been called in.

I'd argue though that SCF's collapse is not like most of the other failed finance companies. (For a start it's bigger!)

Most of the failed companies were dodgy. The growing list of legal action is testament to this.

Was SCF dodgy in the same way? Arguably not. It certainly wasn't run by the nouveau riche in Auckland, the white shoe brigade or the dodgy dealers.

It's one, as Carmel Fisher noted on Larry William's Newstalk business programme, that has stirred emotions and pitched many groups against each other.

But we need to cut through the emotion.

The questions which, for me, linger around SCF are firstly its openness. The company has never, until recently, been transparent. It has always refused to provide information to people.

One of the best examples is the research project FundSource tried to establish. It wanted to understand the finance company sector and get companies to voluntarily disclose pertinent information.

SCF always refused.

This was either arrogance or management trying to hide what it was doing.

Secondly, blame must be sheeted home to some of the management. CEO Sandy Maier was interesting on Campbell Live last night when he described some of the lending practices of the company, especially when money came flooding in under the government guarantee as "cyclical excesses and rushes to the head".

Former CEO Lachie McLeod should be called to account for the company under his watch as it appears that is when most of the damage to this 80-plus year old firm took hold.

The third point, and one perhaps is the most worrying, is comments around how the Hubbard businesses were run. According to the Statutory Managers Mr and Mrs Hubbard weren't likely to win any best practice awards for their back office systems.

However Prime Minister John Key made a comment that administration wasn't much better at SCF. Surely this is something management should have sorted and ratings agencies like Standard and Poors' should have been all over.

While the "commentators" were baying for blood it seemed that SCF was nearly too big to fail and that the political fallout would have been too great for this government.

Well that was wrong. Receivership may well be the best option, particularly because the assets are relatively good (compared to other failed finance companies).

Don't be surprised to see a deal done quickly where some of the assets are on-sold.

As for the government. Well it has handled the collapse pretty well. Writing a $1.6 billion cheque on the spot is a pretty good effort. Investors should be happy (enough) and it is a smart move that the government has essentially taken over the company. (As an aside it is now a finance company - in wind down - and it maybe some sort of political omen).

Whether it has handled the statutory management process well and what effect that had on SCF's demise is another matter.

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