So it looks like the recent Kelt deal wasn't all kosher either .... maybe Sam did OK at the end of the day at the expense of the govt
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So it looks like the recent Kelt deal wasn't all kosher either .... maybe Sam did OK at the end of the day at the expense of the govt
From Sharechat site today:
"South Canterbury Finance is back in business and hopes to lend out $72 million a year to consumers and established business customers as part of plans to make it easier to sell, its receivers say.
McGrathNicol's Kerryn Downey and William Black yesterday released their first report on the failed finance company since being appointed to manage the receivership on August 31.
Their 60-day report reveals a $314 million shortfall in the accounts with South Canterbury Finance's $1.7 billion in liabilities outweighing its $1.39 billion in total assets.
Of its $1.56 billion in loan advances, $446.2 million worth were impaired and $341.2 million loaned out to one of 13 other companies in South Canterbury Finance's charging group as of August 31.
Downey said that since then there had been some further adjustments for provisions. "But it's not a lot," he added.
He said the $314 million shortfall was just one part of the business and all 14 reports needed to be taken into account to get a full picture of the group.
Last week Treasury deputy chief executive Gab Mahklouf told Parliament's finance and expenditure committee the government's net liability for South Canterbury Finance was $300 million to $400 million after fees.
Despite the shortfall Downey said South Canterbury Finance was back in business lending again. It had resumed lending to the consumer market, mainly for small ticket items where the average loan size was less than $10,000, as well as to selected existing customers in the car dealing industry.
"Consumer lending has always been a big part of South Canterbury's business."
Downey said he had budgeted to lend out $1.5 million a week or around $6 million a month, although it was proving to be a slower start than expected.
"The take-up has been less than we expected because South Canterbury was out of the market pre-receivership because the focus was on gathering in cash to recapitalise the business and fund debenture payouts."
Downey said the decision to keep lending had been made to help the business continue as a going concern.
"We have a branch structure with employees - it will enhance the ability to sell."
The Government paid out $1.775 billion when South Canterbury Finance collapsed to depositors and prior ranking creditors.
Yesterday's report did not give any estimates of how much the receivers hope to pay back to the Crown through asset sales.
Downey said they did not expect to include any estimations in the next report either as the information could be commercially sensitive and would be given only to the Crown. The next report is due between the end of February and early May.
In recent weeks Downey has appointed Deutsche Bank NZ to advise on the sale of the "good bank" part of South Canterbury Finance and Goldman Sachs & Partners to sell its investments in Helicopters (NZ) and Scales Corporation.
Downey said the receivers were also looking to appoint banking advisers to the sale of the 34 per cent stake in Dairy Holdings.
The "bad bank" assets were also being advised on by Deutsche Bank.
Downey said he hoped not to have to write off any loans.
The receivers' report gives a breakdown of South Canterbury's loans with the largest proportion of advances to businesses at $690.8 million, followed by property at $256.2 million and the rural sector at $179.6 million.
A total of $1.22 billion had been lent to external parties at August 31.
Downey said South Canterbury Finance's largest loans were to related parties and in the property sector.
By Tamsyn Parker | Email Tamsyn"
I wonder if the above news has any encouraging implications for the SCFHA holders?
What are the prospects for holders of SCFHAs?
1) Receivership
The final year accounts for the year to June 2010 have not been released. They were due by the 31st of August 2010 - the receivership intervened - hence, they must have been prepared, presumably signed off and ready for release.
The only hint we have of the financial state is presented in Appendix 2 in the first Receivers report as at 31 August 2010 (in summary):
Total Assets: $1,391m <- net of impairments
Total Liabilities: $1,706m
Net Liabilities: ($315m)
Impairment provisions are ($446m). If recoveries above these provisions are possible, to the tune of $315m, then the Crown will get its money back.
Source http://www.business.govt.nz/companie...4307BF1308A39C
2) Current State
The companies in the SCF charging group are in receivership. This means that the (sole) secured creditor (Her Majesty in Right of NZ) has appointed managers to conduct the business of the company with a view to selling assets to satisfy the secured debt.
The SCFHAs holders can only demand repayment in liquidation. There are other interesting aspects of the Trust Deed that bear close inspection - say no more ...
The company is still trading.
A total of about $1,700m is owed to the government through the RDGS and the Torchlight bailout.
If we assume that about $1,200m performing loans are still paying at about a 10% margin above OCR (and that government is able to recovery OCR from the SCF bailout loans) - this means that SCF is generating about $120m, annually, in income net of interest expenses.
If it takes 3 years (Treasury documents suggest the receivership will be 4 years) - the government will get 100% of the RDGS money back.
At this point - it would be possible to refloat SCF.
3) Return to SCF Equity Holders
At this point, the only thing that can return positive value to SCF equity is a miraculous turnaround on the impairment provisions. Practically, this is zero probability.
With good-will, it would be possible to refloat SCF. Practically, this good will does not exist and brand damage to SCF is probably complete and absolute.
There are two possible paths forward:
Litigation: Pursuit of anyone and everyone involved in directing, managing, auditing, financing any aspect of the smelly parts of SCF's business. There is an abundance of targets and the delays to the full resolution of the receivership process would allow time for more cash to be generated. This is a popular option in the US - but not NZ.
Restructure: Recently, NZF packaged up a few hundred million of residential mortgages - insured the packages - and sold them as AAA rated investment instruments. SCF could do the same with packages of business, agriculture, consumer and even performing property loans. These things would generate an ongoing return, would allow government to extract maximum cash, immediately, from the loan book and generate Tier-1 liquidity that is sorely lacking in NZ. SCF could lose the retail network, the equity investments and could rebuild based on managing impairment recoveries and a making margin from the management of the packaged CLOs until maturity.
4) Advantages to the Government
Government has taken the first steps to unwinding SCF without a firesale of assets.
They could manage the process in a fiscally neutral (or even profitable) way - with collateralisation and syndication of the loan portfolio under continued SCF administration.
From a monetary viewpoint, the SCF bailout could be viewed as virtuous form of quantitative easing - the RDGS bailout money could recover a margin above OCR (fiscal virtue) and avoid the effective destruction of credit availability (monetary stimulation) without trading partner censure or domestic inflation.
Welcome back Enumerate. I've had my mind on other things lately and haven't kept up with all the SCF developments. What I have noticed though is that there was a report somewhere that the $150m capital injection a while back was probably only worth $10m. It seems like SCF's books were kept in pretty much the same manner as the Hubbard Trusts. messy, undocumented, mates and totally inadequate for a firm that size. It looks like there are a number of Treasury reports which are worth looking at - they show the depth and breadth of the problems which were not released to the public or investors.
Your two options are quite valid. However I see no chance with litigation. The bench mark has been set with the Feltex directors so theres no point chasing them. I suspect Sandy has been economical with the truth to the extreme. I wouldn't be surprised if part of his agreement to take over SCF was an indemnity clause from the govt.
Any chance of an SCF restructure. Well I guess there is always a chance but I wouldn't be backing it. SCF was Alan Hubbard. Hubbard and SCF's reputations are irreparably tarnished.
Option three (which won't happen) is an inquiry into why govt didn't move to put SCF into Stat Man. Clearly they were happy to do it to AH and clearly they had loads of information well before AH's Stat Man.
Where would I put my money. Probably into Peter Jackson so he can make a movie about this. He did a decent job on the two Christchurch girls who murdered the mum. Parker and Hulme grew up in the '50s as did Alan - and he didn't move on. They created a fantasy kingdom just like Alan. Their relationship was blind to others, just as AH's backers were equally blind. The two girls took out the one obstacle to their happiness. For AH to be happy he took out all those who saw no obstacles. A wee change in location with a similar plot line and he's onto a winner!
NBR today has a story about a rich US farmer who seems to have millions in deposits gone missing .... not even recorded he says .... he knew Alan was a good joker .... just didn't get the kosher part
I think the chances with litigation are excellent.
There seems little doubt that directors are in gross breech of their continuos disclosure requirements, traded recklessly, traded whilst insolvent, breeched any number of directors duties, comments that SCF are breaking even amount to a fraudulant misrepresentation of the companies position and so on and so on.
If i'd lost millions in SCF pref shares i'd be litigating this and into it boots and all, (the far smarter move was not to be involved in the first place) and anyone who had even taken a passing interest in some of my comments over the months should have been alerted to what an extremly serious problem the whole SCF mess was....but be that as it may, by various accounts a number of parties are preparing to litigate in the very near future and good on them I say. The fact that Sandy and the directors may have recived a guarantee of indemnity from the crown against legal action shouldn't impeed legal action it just means the target is so much bigger !!
There's massive differences between the two cases, in concise terms, in the case of Feltex there was gross incompetence from pretty average directors, whereas I would suggest in the case of SCF there was gross negligence and wilful misrepresentation from some of N.Z.'s top line directors and they've left themselves wide-open to litigation and will indeed face same, you mark my words. They deserve to get a serious financial belting for such an appalling fiasco and I predict they will get it. Part of me strongly wishes I was a party to such action, unfortunatly, or perhaps fortunatly as the case masy be I stopped buying their corporate B.S. many months ago.
Have you all got your orders in for:
Allan Hubbard: A Man Out of Time
Author Green, Virginia
ISBN 9781869794828