TRY SCFHA on the NZX.
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Read the comments at the end of this article
http://www.nbr.co.nz/article/south-c...-breach-112177
Heavy redemptions coming up ... people not renewing / rolling over existing things .... even with a government guarantee
The red flags are certainly flapping hard in a gale now. We only have to look back on past finance company collapses to see the same things recurring.
- inter party transactions
- iffy loan book
- late audited accounts
- breach of covenants
- fronted by a person who is giving an illusion of integrity
- preliminary results inconsistent with final results.
Fair value adjustments smell of cooking the books to me. Fair value should have been well understood by a company of this stature a few months ago. Nothing should have changed in their interpretation of fair value to create a difference between the preliminary and final reults.
The Dunedin office has been closed down.
That's the one that has advertised property investments (which they had financed and word on the street said the developer was in difficulty), boats & farm bikes in the window over the last year or so...
A saving on the main street rent, I guess?
The yield on the listed bonds are blowing out big time. Market obviously does not buy into recapitalisation or safety of government guarantee?
How good is the government guarantee? Can it be void if SCF has not fully fulfilled its obligations?
There are some sweating it out there - Forbar who has single-handedly pumped in tens of millions into SCF and Chris Lee who waxed lyrical about the greatness of Hubbard and his undoubted integrity.
Turns out SCF is managed more or less like most of the other finance companies - plenty of property loans and related party transactions (last count $230m?).
Sweating here too, but decided it's too late to get out, will just hang in and hope if they go under, there will be something left for the debenture holders. It's a hard choice to make.
The government guarantee is fine. Its just that it runs out 12/10/2010. To participate in the extended scheme, you need a credit rating of at least a "BB" and have to pay a cool 150 basis points on deposits. If a finance companies' bonds are maturing after this date, then they need to have a rating to have the them covered by the govt guarantee.
So the question is, will SCF gain a credit rating? At the moment, the market is pricing in....well...a yield to maturity of:
~30% for their 15/1/2012 bonds.
~20% for their 15/06/2011 bonds.
The shorter maturity bonds within the current government guarantee scheme has them trading at a more normal yield, because they are covered.
~7.50% for their 10/08/2012 bonds.
Hope that helps clarify a few points Balance.
You should be fine if your debenture is covered by the government guarantee. There's something dreadfully wrong with the listed bonds trading at 20% and 30%. Market is saying that SCF's guarantee could be void?
Amazing the company is not coming out and saying something.
I'm tempted at that sort of yield. Can ol'hubbard bail this out? Can't believe they got up to the related party lending as all the other outfits, really!? Hubbard has been around and around again, surely he'll find a solution to this?