South Canterbury Finance faces billion dollar liquidity risk

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.