Currently , SCF cannot repay the USPP .... of course that might change , but as of now (and as flagged in the accounts) the company is insolvent. Period.
M
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Currently , SCF cannot repay the USPP .... of course that might change , but as of now (and as flagged in the accounts) the company is insolvent. Period.
M
As a Chartered Accountant I am fully aware of the accepted technical definition of insolvency but, having renegotiated the US Private Placement repayment terms, SCF cannot be classed as "insolvent" on that score. How many other publicly-listed companies have re-negotiated their debt facilities, particularly in recent times? For instance, PGG Wrightson? Think about it.
Hi Balance,
That is correct, but it does not, at this or any time in the recent past at least, apply to SCF.
The $100m 'facility' was repayable on demand. If such a demand had been made, then it might have become insolvent at that point in time, however no such demand was made, and hence it was not insolvent.
That is why the auditors declined to express an opinion either way on the 'going concern' status of SCF at the time they signed off the audit report (using the term 'fundamental uncertainty').
The more I think about it, and subject to the details of the new $75m facility, it appears to me that SCF is now on solid ground, and the yield that we were getting last week (25% pa +) on the prefs was excellent value. I would expect the price to increase / yield to fall this week a little pending the details of the new facility. If is looks 'good' then I would expect that yield to fall further - probably at least back to the mid to high teens , implying a price of around 35c or more for the perpetual prefs?
Alan.
I mentioned this some time ago.......
IF you believe SCF can come through this difficult period, with sufficient capital, a credit re-rating to investment grade, possibly a re-invigorated management, and certainly, a better attitude to how it runs its business, then the SCFHA's are a stunning buy.
Remember they are Perpetuals, with an annual rate reset, so we need to look past the current coupon of 5%ish, to assess what a longer term yield might be at the current price of 32/35 cents
If the coupon averages anything like "normal" NZ yields plus the 2.3% margin, lets say 9/10%, then the long run average yield will perpetually be nearer 28/30%
There are a lot of IF'S to be sorted but those are the sort of parameters we are looking at based on todays price.
Not a bad risk/return......
Nice for SCF to read that there's still blind faith out there.
SCF was insolvent - the USPP holders demand repayment and SCF could not pay. That is a fact. Now SCF has 5.5 months to pay.
Where is it going to get its money from? From the NZ public no less under a short term, government guarantee. But its assets (lending) are long term.
As I wrote before, the market is not dumb or fooled. That's why the yield is so high.
If you are such a believer in its survivability, its bonds are the best buy in the market. Go for it.
I have missed something here!!!!
when have the USPP holders demanded repayment of the bonds?
you havn't answered the question.
The USPP holders demanded repayment as they were entitled to once SCF breached its investment grade rating.
SCF could not pay or has negotiated a 5.5 months period to repay.
You want SCF to tell you that? Same company which has been piling on related party transactions without letting the market know?
Read the NBR.