sorry Alan, it didn't come up highlighted no mallice intended.
Printable View
South Canterbury Finance has cancelled by mutual agreement with its banks the
$100 million standby credit facility. This facility was undrawn.
A new credit facility for $75 million with a new third party provider is in
the final stages of being arranged and is expected to become effective over
the next week.
I copied this from the announcement 15-10-09
Hi Balance,
Please can you explain your logic in more detail as it appears wrong.
SCF had two $100m facilities. One was never drawn on, and was removed last month. The second one was fully drawn (or at least $100m drawn).
They are repaying that second one (over five or six months) and putting in place a new facility ($75m) plus liquidating some forex hedges that will free up some additional millions.
Is one of those facts wrong?
Thanks,
Alan.
Alan, thank you for your well-considered and factual input into the debate - dare I say "balanced"! I had given up trying to make the point that no evidence had been produced that SCF was insolvent. Directors who allow a company to continue trading when in that state render themselves wide open to penalties.
Directors have a couple of pertinent resoonsibilites - one is to not enter into an obligaiton knowing reasonably that it can't be met when that obligation is due to be met. I presume that at the time the $100m facility was organised the Directors felt that they could meet any obligations at the time those obligatiosn were due to be met. Like wise with the new $75m they must figure they can meet whatever obligations have been arranged.
They can also continue to trade while being insolvent - they can't do it recklessly and they probably can't do it for long. It sounds like the $100m was able to be paid when it fell due so SCF wern't insolvent - and even if they were the directors could still trade and come up with some arrangement in the meantime.
On the face of it the Directors appear to be doing what could reasonably be expected of them so its pretty unlikly any penalites could be anticipated.
Hi All,
Kicking off the new forum with a discussion on SCFHA.
Currently they are trading at or about 35c giving a gross yield of about 16% by my calculations (5.61% at 35% ~ 16%).
This seems pretty good compared to the yield they announced today with the release of a new prospectus (8%):
http://www.stuff.co.nz/business/indu...new-debentures
The big difference is that the debentures are govt guaranteed though, so not really comparable.
So, do you think it is time to sell out at 35c / 16%?
Alan.
Disclosure: I hold SCFHA.
This is more like it.
As long as Hubbard and management stop using SCF as their own piggy-bank and there is a real independent board (not cronies appointed by Hubbard), SCF could yet be NZ's next bank.
http://www.stuff.co.nz/business/mark...back-loan-book
Have I gort this right.
The USD$100m is now USD$115m
Its going to be repaid by a new NZ$75 facility which hasn't been agreed yet.
A further NZ$40 - $75m will hopefully come from selected investors.
They will be selling dairy farms. (into a market where values seem depressed and there are loads of water resource consent issues that aren't resolved and not looking great).
Property loans are being wound down. At a time when there appears to be a more positive view of property.
And $46m is held in trust but some investors are choosing to withdraw their money.
I totally agree with you.
If they are serious about potentially heading towards bank status, and it *appears* that they are from what they have said, then they have to get their disclosure issues sorted, and also put in place internal controls to stop any related party transactions being done without transparency (of process).
I have no issue with SCF making a small loan (relative to the entire SCF book) to a company that Hubbard has a stake in, but it should be done entirely independently of any interests within SCF and probably more conservatively than to any unrelated parties in terms of lending criteria and collateral.
Alan.
I thought I read that the US$15m was Southbury's cost - not SCF? Was that wrong?
Again - I thought that was going into Southbury, so not directly available to SCF? If so, then on that point things are worse for SCF?
Looks to me like a good time to get out dairy farms with falling yields (NZD strength for starters), and the farmers shooting themselves in the foot with respect to financing of Fonterra.
Not from anyone that seems to have a clue. Does no-one learn from history? Why is it that every single cycle there are so many people who are willing to believe that 'this time it is different because.....'??
Remember how the PEs in the tech boom were entirely justified because the economics of the tech industry were totally different? Funny how the same thing was said about almost every other boom.
If you want to see whether a market is over inflated, just look at the yields. If you can't borrow 100% and at least break even, then get out or stay out, since you are making less money on an 'equity' investment than the lender is on secured debt.
Ah well, good for some I guess.
Correct. No idea what proportion of the $46m will be put into SCF in the next few weeks. What do you reckon?
Thanks,
Alan.
According to teh newspaper article: " SCF will also pay a US$15m refinancing fee regarding the private placement"
Ah yes - it looks like it is the parent. But I'm wondering if this wil then be injected into SCF cos I'm wondering where SCF is getting the usd$115Quote:
Again - I thought that was going into Southbury, so not directly available to SCF? If so, then on that point things are worse for SCF?
Looks to me like a good time to get out dairy farms with falling yields (NZD strength for starters), and the farmers shooting themselves in the foot with respect to financing of Fonterra.
Perhasp its more a metter of timingh. Are tehy selling out in an appreciateing or depriciating market.Quote:
Not from anyone that seems to have a clue.
Thats all going to depend on the S&P rating coming out soon. I don't think investors wil be rushing to pull the money to invest in Kathmandu - just can't see them in that demographic. But then the CE didn't mention the USD$15 refininacing fee in his press release the other day and they still haven't made progress on those independant directors. Perhasp there is enough good news to fill them with enough confidence to keep the money in.Quote:
Correct. No idea what proportion of the $46m will be put into SCF in the next few weeks. What do you reckon?
Hi MiniMoke,
Looks like it depends on which report you read - this one is quite explicit that the US$15m is a liability of Southbury, and not SCF:
Full original article here:Quote:
Originally Posted by ODT - The Newspaper, not a member on ShareTrader!
http://www.odt.co.nz/print/78869
It does use the terminology 'paid through' which is a little ambiguous.
Given the (relative) specificity of that ODT article, I am guessing that it is not SCFs issue (the US$15m)?
Alan.
This comment from a reader on the NBR site under this story just michief .... but seems to make sense
http://www.nbr.co.nz/article/south-c...eks-75m-113741
New
So, next week they'll have no cash left?
NZ$41.3m in cash on 30 Sept, less US45m 25th Oct, leaves them with approx nothing next week?
With the level of stress indicated in their prospectus registered yesterday, they aren't far from another downgrade, which will make them ineligable for the extended govt guarantee, and SCF should be in receivership before Christmas.
SCF still Alans baby .... with money being raised through Southbury and Southbury injecting capital into SCF
Hi ALn
I'm clearly going to look a bit dense on this one.
Teh ODT articel says:" It {SCF} has also for the first time confirmed payment of a $US15 million ($NZ19.8 million) penalty, in the form of a refinancing fee, to a US lender which is calling in $US100 million ($NZ132.6 million) in loans, plus further unspecified interest charges."
I read this as being a liability of SCF but Southbury is paying it. I'll then go on to interpret this as SCF not having the USD$15 now to pay this penalty and it doeen't have it in the future - otherwise Southbury would surely want it back.
"Paid through" is very ambiguous - and a company wanting to secure investors loot can't IMO afford to let teh market see ambiguity. And now we have unspecified interst charges.
Edit - and a few posts earlier Temuk reckons he spoke to the CE who said the loans weren't recalled and that SCF were repaying them. Yet this ODT article suggests the US were calling in the loan. How to interpret? Who to believe? And they want to be a bank? Or is this a smokescreen?
Amazing that a company of this size and profile (and in turmoil) has had only 2 directors for a while now (Hubbard and Sullivan) .... obviously only need a quorum of 2 for a Board Meeting ... and you can sort of imagine how they go ... Hubbard says something and Sullivan agrees
Maybe that is why they are in turmoil
{Grin}
Clearly there are still risks, but that explains the yield of 24% that was on offer when I bought in at 23c.
I would likely sell out somewhere between 35 and 45c even though I did not purchase it as a speculative investment - I purchased for the yield.
Having said that, I may exit some at 35c and leave some in, effectively reducing my purchase price on the remainder down below 20c if you want to look at it that way (rather than considering the gain on what I sell as a profit) but this would be to rebalance my portfolio back to the kind of dollar investment that I was aiming to have in SCFHA in the first place.
Alan.
What a shambles ... good luck to anyone game enough to invest!!
http://www.stuff.co.nz/business/2986...-ahead-for-SCF
Hardly - the reporting is pretty poor (probably par for the course in NZ unfortunately).
I agree, but presumably that wording ("paid through") is from the ODT?
Perhaps the editor should have sent the journo back with their tail between their legs to re-word and / or clarify.
Alan.
To be honest, I don't know what their obligations, if any, are when uncertainty is created by an article that a private (unrelated) party publishes.
In this case it is the ODT, but they are (legally) no different to you or me or any of the thousands of blogs out there, any of which could publish something similar.
It seems unlikely to me that the issuer of a listed security has an obligation to address each and every article published anywhere, anytime that it is 'uncertain' or creates uncertainty (which is, itself, a subjective thing of course), but perhaps it is a listing rule that I am not aware of (which is quite possible)?
Alan.
.
IMO this type of communication (News Papers) should never be taken
as fact. Always verify their articals. They will never print corrections
unless legalities dictate. TV is worse.
eg. TV1. PR man a few years back after I challenged them. " our bizz is about entertainment, not education, so absolute fact is unnessary".
Some here might remember TV1 quoting NOG as being an Australian Coy,
when challenged,they replyed "you get your facts straight", Geeez
BB
Why beat up on the media? They have at least kept the market informed whilst SCF went about its merry way of using the public's money as its own piggy bank.
30% of SCF's loan book is interest-only and probably, capitalising interest loans. SCF was living in fool's paradise - a micky-mouse Timaru company using investors' money to join the big league of property development lending.
Them, there's the related party lending - a staggering $230m against real shareholders' funds of $110m. So Hubbard puts in $1 and takes out $2.30.
Good one.
SCF has a chance to get itself out of this mess - let's hope it takes it.
Hi Alan,
I guess it depends how much you paid, and why you bought them.
SCFHA are a cheap way to get into floating-rate fixed interest.
I believe that we will have "high" inflation (+5%) in the short to medium term so the annual rate reset is an attractive feature.
The downside of SCFHA is the risk, but I suspect that the receivers will find more than 35c in the dollar should the time come.
Overall, I rather suspect that the SCFHA's (and many other HA's, come to that) were bought by people who had no idea what they were buying.
If you prefer fixed to annual resets, some of the BNZIS series are quite attractive on yield.
Good point. I bought at 23c and entirely for the yield which at that price was about 24% pa.
Yes - I agree and that was a factor in my thinking. They were yielding 24% at the time of purchase (16% today based on 35c), but that is with the interest rate at 5.61%.
If the 1 yr swap rate is, say, 7% next year (Oct 2010), then the nominal return will be 9.3% which will equate to a yield (on cost) of 40% or 26.5% on 35c (which is the price today).
Interesting thought. I hadn't considered that. What other HAs are there on the market? Do you know how I can search that?
I couldn't find anything called BNZIS (but you do call it a 'series'). I found these:
BNSPA BNZ Income Securities 2 Limited Perpetual Non-Cumu
BNZ080 BNZ 15/06/17 8.42% Subordinated Bonds
BNZ090 BNZ 07/12/17 X.XX% Subordinated Bonds
Are those what you refer to?
Thanks,
Alan.
A remarkable story of survival
http://www.chrislee.co.nz/index.php?...finance-update
Big yawn. The biggest SCF's apologist tries and justifies how he could have got into SCF and the finance company sector so wrong and so donkey deep.
Hubbard put in $1 equity and took out over $2 in related party loans. SCF also bought investments and assets off Hubbard. Which part of that does Chris not understand?
Still, it's water under the bridge hopefully and SCF can successfully refinance itself.
Chris Lee LOL .... talk about 'Custer' talking his own book!! Shameful ,, would not be so funny if he had any credibility left .... most will see it for what it really is..imo
M
See if you can make sense of this :
http://www.treasury.govt.nz/economy/...e/retail/qanda
Reads to me that if the bonds are/were issued directly to a retail investor, then it is covered.
If you buy the bond from an institution which is selling, it is not covered as the bond was not covered in the first place.
So teh BNZ isn't prepared to lend to SCF. There has to be a yellow flag warning to investors there. It seems Chris Lee thinks SCF are home and hosed, the problems are all behind them and the future is rosy. Hopefully it is but I think he's calling it too ealry. The ducks SCF need to line up are not there yet - the only one so far is the release of the prospectus.
Okay - it is not entirely clear what is covered, but I *would* say that no preference shares at all would be included including ASB, BNZ etc.
I think this section excluded any prefs:
Quote:
Originally Posted by Treasury - See URL above
That last line excludes any prefs from my reading, since it is not a loan or a deposit.
Do you think that is correct?
Thanks,
Alan.
I have looked at the SCFHA's.
The main problem I have with them is the conditions of the Trust Deed.
- It is possible for the company to halt payments of interest, at its discretion
- The prefs could be made to pay 0%, indefinitely
- There is no recourse for holders to get any compensation or trigger a company windup.
Deeply, deeply subordinated ... a 5% yield is in no way real compensation for the risk. Hence the deep discount is appropriate.
Unfortunately, there are better opportunities elsewhere.
Hi Enumerate,
Are they cumulative though? Clearly these are shares, not loans, so I would not expect the company to have an 'obligation' to pay the dividends as that could be against the interests of the creditors of the company.
However, I understood that most prefs are cumulative which means that the dividends accumulate (but are not a liability) and must be paid prior to any dividend being paid to the ordinary shareholders? Hence them being 'preference' shares (rather than 'ordinary' shares)?
Are you able to point me to the trust deed - which I should have already read of course!?
I searched their site (scf.co.nz) but couldn't find it anywhere there.
Clearly all the shares would be subordinate to any creditor - including unsecured creditors, but that is always the case I think?
The very name implies that they would stand ahead of the ordinary shares only?
The prospective yield though is currently much more than 5%. When I bought at 23c the yield was about 24% pa which was the market's assessment of fair compensation for the risk at that point in time.
Personally, I felt it was too good, hence I bought (although clearly for every buyer there is a seller too!) Since then the market has adjusted to reduce the risk premium to around 16% (at 35c price) through there being competition for the shares that have been offered for sale.
Having said that, I have reduced my holding to adjust back to the net invested value that I had at 23c, and thus taking out more than 40% of my cash investment, but still leaving in the same market value as on the day I bought.
I am thinking a good target price now is around 40c or a little more with a yield thereon of about 14% which compares to their deposit rates of around 7% - 8% (if you don't mind having your cash tied up and no rights to get out).
Having said that, there is definitely a risk attached - it just comes down to whether the risk / reward balance is right I guess.
Alan.
3. The BNZ, having borrowed heavily from SCF for many years, refused to lend to SCF under its standby facility in recent weeks. SCF has severed this arrangement and is now to finalise a $75m facility to replace the BNZ.
(In 2008, BNZ during a time of extreme pressure, borrowed more than $200m from SCF.)
Are BNZ still under "extreme pressure" and unable to lend to SCF?
Remember the tax dept is circling!
It only cost Westpac $940 (or so) Ma Ma million
More likely they had to reduce their exposure to meet the capital adequacy rules, and pulling an unused facility from SCF was an easy option.
Given that it was only a stand-by for SCF then not a major relationship issue I would say. I think Chris Lee is overblowing the 'betrayal' angle, but then he is known for being very pro-SCF.
Alan.
Hi Alan
I tend to have a look at the Direct Broking Fixed Interest pages - Rate Card & NZDX Securities.
For some reason, Perpetuals seem to be xxxHA (SCFHA, IFTHA, etc)
Re the BNZIS series
BNZ Income Securities Perpetual 9.89%
BNZ Income Securities 2 Limited Perpetual 9.10%
Regards
Chris Lee is just trying to blame everyone else for SCF being in such ddep strife.
Betrayal? SCF leaves its float fund with the BNZ and then, expects the BNZ to lend it $100m so that SCF can buy more assets and lend more money to Hubbard and management?
Biggest BS I have read in a long time.
Hi GTM 3442,
Sorry for being dim, but can you confirm the tickers?
I found two BNZs I think (the BNZ090s appear to be delisted):
- BNSPA - BNZ Income Securities 2 Limited Perpetual Non-Cumulatives
I assume these are the 9.10% ones?
- BNZ080 - BNZ 15/06/17 8.42% Subordinated Bonds
These are being labelled as 8.42% rather than the 9.89% that you refer to? Are they the same ones?
Thanks,
Alan.
Alan - try BISHA.
Why has this thread been moved??
Week nearly over ,,, USD45m due today ...... and still no sign of the NZD75m debt facility??
M
BISHA.NZX - BIS 00/00/00 9.89% BNZ Perpetual Non-Cumulative Securities
BNSPA.NZX - BNZ Income Securities 2 Limited Perpetual Non-Cumulatives
Apologies for the late response:
For the Trust Deed and all the formal filings ... go to the Companies Office site and look up South Canterbury Finance:
http://www.companies.govt.nz
This site is really interesting ... you can trace all the Trust Deeds and prospectus filings of any company. Just might have to load up the Trust or Limited Liability Company elements to track down the seat of an investments filing. Very useful site for the investment researcher's "bag of tricks".
No, my understanding is that they can freeze payments and not incur any obligation to accrue payment at any future date. The only thing that stops them from using the SCFHA as a zero rated loan is the Trust Deed provision that they cannot payout on the SCF ordinaries, while the SCFHA are zero rated. My fear is that if they are recapitalised ... the new shareholders would welcome a period of nil payouts while they rebuilt the SCF capital structures ... SCFHA would be used as cheap equity ... without any prospect of sharing in the upside.Quote:
Originally Posted by Alan3285
I realise that this is a very low probability possibility ... it would significantly damage SCF from a future capital raising perspective. However, it is an "exposure" I am not comfortable with.
Check new special offer on debentures on IRG group website I would say they are getting desperate www.equity.co.nz/ hope this is correct web address for the offer as it came by email.
South Canterbury Finance, will seek cover under the government's extended retail deposit guarantee after it released a new prospectus earlier this week.
The prospectus revealed chairman Hubbard came to the rescue of the finance company once more, and he has personally injected around a quarter of a billion dollars into South Canterbury over the past three years.
However, this will probably be the 81-year-old's last hurrah, as he announced he will be retiring as chairman within 12 months as the company brings on two independent directors to the board - one of whom will take up the role as chair - and bolster its management team.
The prospectus revealed the finance company will look to raise as much as $75 million in a private placement, and it is also considering selling off its dairy farming assets.
The prospectus was released after South Canterbury Finance organised a repayment plan in installments to U.S. investors owed US$100 million after the company's credit rating was down-graded to a BB+ and put on negative creditwatch. Hubbard's Southbury Group will foot the penalty to the tune of US$15 million.
South Canterbury Finance also reaffirmed its commitment to meeting the Reserve Bank's capital ratio requirements through the recapitlisation plan, and is confident that it will be taken off rating agency Standard & Poor's negative creditwatch after releasing the prospectus, allowing it to raise new funds.
Like Marac, South Canterbury Finance is moving away from property lending, which left a large hole in its financial statements due to impaired loans, though due to the lack of liquidity in the market it recognises this will be a gradual process.
It also said it would reduce its level of related party loans by at least $50 million.
You need to add the assets and investments that SCF has bought off Hubbard & directors to the outstanding related party loans and advances. Example, $75m for dairy farms etc.
Numbers look like $400m plus out, $250m in. Net net, Hubbard has been using SCF as his piggy bank with the public's money to 'invest' in properties, companies etc.
Trying to spin a spider-web out of BS.
And Sam Kelt arrested again for violence
http://www.nzherald.co.nz/nz/news/ar...ectid=10605828
How long beofre SCF disassociate themselves from this guy? Not a good look.
M
Sam doesn't like boyracers does he .... last time they had a disagreement they beat him up .... this time he kciked their cars .... think he would learn eh
And that small matter in a restaurant after a day on the proverbial (not Sam but his mates) wasn't a good look either
Sam prob pissed off with them because they called him a BANKER
Perhaps more charges to folllow?
- Wilful Damage
- Concealed Weapon (Parker Pen)
- Jay Walking
- Possesion of Misleading Debentures?
- Indecent Exposure (to property loans)
etc
LOL
M
Indeed! Love to see the terms and security provided for the 'facility' .. Hubbards nuts were firmly 'in the vice' ,, and remain so imo
M
More ducks lined up: Todays new has three new direstors:
" SCF chairman Allan Hubbard said the combined experience and skills of the new directors would make a significant contribution to the company.
"We are privileged to obtain the services of three outstanding directors. We recognise the desire across various stakeholders for South Canterbury Finance to enhance its governance arrangements with the appointment of additional independent directors. These appointments are a further step forward in the restructuring of South Canterbury Finance. Further announcements regarding the company's restructuring plans will be made when we are able to do so."
Baylis is chairman of Real Journeys, director of Port of Tauranga, Landcorp Farming (effective 1 November 2009), and a number of private companies. He is a former chairman of PGG Wrightson, Pyne Gould Guinness and Naylor Love Enterprises.
Baylis was a partner in the national firm of KPMG until 1992 when he established his own specialist practice. Company directorships now occupy the majority of his time.
McLauchlan is chairman of Scott Technology, deputy chairman of the Pharmaceutical Management Agency (Pharmac) and a director of a number of other companies including Scenic Circle Hotels, Dunedin Casinos, AD Instruments Pty and Aurora Energy.
His other appointments include pro-chancellor of the University of Otago and crown monitor to Southland District Health Board.
Shale is a practicing lawyer and has been a member of boards of listed companies for over 20 years. At present he is chairman of The Farmers' Trading Company, Jenkin Timber, Eastern Hi-Fi Group, the Japan New Zealand Business Council and Mercy Hospice Auckland Foundation.
He is a director of listed companies OceanaGold Corporation and Turners Auctions. He is also a director of Munich Reinsurance Company of Australasia and several other private companies."
Hi Enumerate,
No problem - I offer the same apology!
I had a look on the site, but I can't work out how to find the details of the prefs (SCFHA) or indeed the bonds (SCF010 for example).
There are loads of documents there. I looked through the list of them, but nothing is 'obvious' to me as being what I need. The closest would seem to be 'Amendments to Trust Deed' but I downloaded one and they don't seem to talk about the terms of the prefs or the bonds (unless I totally missed it!)
Sorry to be a pain, but are you able to point to the relavent document more specifically?
Thanks,
Alan.
Use the following date reference ... I think this is the document you need ... the terms of the trust deed are on page 63, or so ...Quote:
Originally Posted by Alan3285
Prospectus 15-NOV-2006 14:12:28 10052347892 Prospectus 3279.5 Kb
Hi Enumerate,
Perfect! Thank you so much for that.
To confirm for others who might follow:
- The prefs (SCFHA) can have their dividend cancelled if the directors want to (page 64 of the document that Enumerate referenced above, clause 1.7b) for any reason they like basically;
- The dividends, if cancelled, are not cumulative (same page, 1.9);
- The ordinary shareholders cannot get a dividend ahead of the preference shareholders.
Hence the 'risk' is not insignificant, but the market would likely react very badly to such a decision.
Personally, I think that they have gone up to a very fair price (best price being offered if you want to buy today is 48c) with a current yield (at that price) of about 12% which is 50% more than you can get from SCF debentures, and should stay around there (in my humble opinion).
Alan.
. . . lately.
I wonder why.
I don't think they have actually gotten 'popular' - they are still trading at a very substantial discount to their issue value (60% discount as of the time of posting based on last trade).
However, I do think that they have returned to a fairer value.
Back a couple of weeks ago when some people here were saying they were a bad investment, they were trading at 24% yield - that was way to high in my opinion.
Today they are trading at 14% yield which I think is around about right (12% to 18% I would say).
All that has happened is that people have recognised they were too cheap and that created demand.
Interestingly, as of right now, there are 305,000 'buys' on the board between 31c and 40c against only 65,000 'sells' between 42c and 48c, so there seems to be substantial support in depth for the current price with some potential upside still. I would say 49c is the upper end in the short to medium term, but speculators might push it over that for a brief period.
If you like a roller coaster and have the guts / timing to get out at the right point, you might be able to make 10% in a month, but I don't have the experience for that kind of trading ;-) and I wouldn't be advising it to anyone who doesn't know what they are doing!
Alan.
Quote:
Originally Posted by winner69
Auditors are Woodnorth Myers
Imagine the US investors asking 'Lachie - who are your auditors' and lachie says 'Woodnorth Myers - respected accountancy firm in Timaru with a branch in Ashburton'
Not being disrespectful to anyone ... but appearances are important.
posted by temuk 23-9-09
Used this firm when I was in busniess, the forementioned gets the big thumbs down
from me!!!!!!!
they must be reading this forum!!
temuk
Good move .... learning they need to be seen to be respectable and all that
Well, Lachie Mcleod is off to pursue other intersts. Resigning at the end of the month to go farming. A compnay in difficulty with no CEO isn't goingh ot be great. Just how much of a burdon can Hubbard take on?
Verrrry interesting, for those of us with capital at (big) risk, where only recently it was touted as "very safe".
Hopefully a new competent CEO will emerge quickly, & have the guts both to start unravelling some of the more blatant conflicts of vested interests, and also to gently but firmly advise elderly gentlemen of the limits of their writ to play about with other people's money invested in good faith.
Hope it all turns out okay for you Sharer.
I've never had more than a few grand (always less than $10k for certain) in SCF so even if all went South (pun intended!) it wouldn't have caused me too many major problems - just been intensely annoying, but I do sympathise with those who are stuck in there big-time without many choices.
Alan.
I really feel for the bond holders of SCF, as I do for all the other finance company investors.
I cant for the light of me wonder why you would want to pump in more money for these geezers. What is stopping these guys from using the funds as their own piggy bank in the future?
Personally, I would rather be a bond holder than a debenture / term depositor.
At least the bond holders can bail out anytime they want by selling on market - albeit perhaps with a loss of capital.
Those who have placed funds on deposit for a defined term are pretty much stuffed as I don't think many finance companies are letting funds out early at the moment.
I'd bet that many, if not most, of the debenture holders in Hanover would love to have (had) the option to bail out for a 25% loss by selling their 'investment' on market.
Alan.
I was there today and it's a pitty people making comments like this should have been!!!
you would have found out helicopters NZ had $30 million ( for 2 new chopters for a new contract in perth ) finance all signed up with GE but 4 days before needing it GE told them
fine us take us to court, we just havn't got the money.
what do you do WHO ????? Terminate the contract before it even starts!
His humour also shone in a very relaxed speech.
1 investor (a local doctor (a real one)) presented him with a person plate for his 40 year
old VW, it read SCFAAA.
With this Mr Hubbard said 1 investor from Fairlie vinage machinery museum wanted to buy
his car for the museum, he asked him 'how will I get around, I'm a bit old to walk".
but said he has changed his will to give it to them.
He also commented about mainly north island finance company's that have gone under,
"we don't build $30m houses, 1 even had big flash yacht-you don't see us having any yacht's in Timaru harbour.
There was no champane, not even wine. A few club samies and some ordervy things and orange juice.
Well worth 1 1/2 hours of my time.
If you want to know more just ask and don't rush to conclusions.
While all the cynics and sceptics and scoffers are sounding forth, could I just meekly and politely mention that some of us are actually making money, hand over fist, on our exposure to SCF. I bought my last lot of the perpetual prefs at 38c on 14 July -they ended up at 57c today (some traded at 60c) giving me a capital gain of exactly 50%, plus dividend, in the space of 4 months. Now, how many of the said cynics, sceptics and scoffers have been able to better that, over the same time frame, elsewhere on the NZDX? I have also revelled in some super returns on the SCF010's, and am amazed that they are still selling on a yield of 19% - Alan Hubbard would have to lose every cent he has invested in SCF, and all the preferential shareholders would also have to lose every cent, before the debenture stock is at risk!
Temuk: I agree that its rather sad that so many seem to have little real knowledge of the situation here. For instance, Scales Corporation came out with a record profit result for their past year - probably greater than the majority of all the listed companies on the NZX Mid Caps; I will jump at the chance of taking up shares in the Southbury Group, with entities such as Scales included in the offering.
I can assure the cynics, sceptics and scoffers that I am not given to wild, irrational behaviour when it comes to my hard-earned investment dollars.
Yes, it might have been nice to have had a permanent replacement for McLeod all lined up before his departure takes effect, but I am sure that the appointment process is well under way and meantime Forsyth Barr will be the ones driving the capital raising and surrounding issues. In fact, they probably encouraged McLeod's early departure, given that the situation now requires a whole new set of skills.
Watch this space, and relax! I certainly am.
Tell that to the thousands of SCF debenture holders who thought they could trust SCF with their money.
Instead of prudently managing their funds, SCF and Hubbard speculated with it, funded his own activities in the last year increasingly with it (recklessly and thought nobody would mind) and is now scrambling to keep SCF from going under.
Relax indeed.
One of the visible exposures that SCF has to the market is the perpetuals. These have risen from 24c to 60c over the pats couple months.
I suspect that this reflects a view that SCF is now much less risky than it was. Essentially, that it's "coming right".
I also suspect that there's rather a lot of value inside SCF/Southbury/et al.
I further suspect that there may be some "South Islandedness" coming up - around PGC/SCH/Southbury/SFF/PGW/Marac. Not sure what, but it's been somewhat turbulent in that space lately - and turbulence often tends to lead to opportunity.
I would rather trust a man with wallet zipped tight and padlocked than hanover man
building $30m house!!!
Temuk
It seems there is some confusion aorund the performance of Southbury and SCF. By all accounts Scales and Helicopters have performed (very) well. Its the performance of SCF which is the concern. I gather yesterday Hubbard says they have just made their biggest ever loss and also that Lachie is the one that led them into the property development loans - and so teh blame rest on his shouldres (actually it doesn't - some might but that kind of strategic direction falls to the Directors). Interesting also that Lachies 15m loan looks like it will be transferred into shares which he can then sell - haven't quite figured that one out yet.
According to this guy the $15m loan was the reason why lachie took risks
http://davidhillary.blogspot.com/200...eo-lachie.html
South Canterbury Finance CEO Lachie McLeod 'required to take risks that were not appropriate'
With the news yesterday that South Canterbury Finance CEO Lachie McLeod has resigned, today some comments are emerging about the reasons why he's leaving, but also some of the factors that contributed to SCF's agressive expansion strategy under his leadership that have lead to heavy losses and a change of strategy toward retrenchment today.
Chris Lee, a Kapiti Coast based financial adviser who had put client funds into SCF, is quoted as saying:
He said one of the company's worst mistakes in recent years was lending Mr McLeod $15 million to buy shares in the company.
"He's a good bloke and a good dairy farmer, but that loan meant the company was required to take risks that were not appropriate in the last few years."
As I have commented before, this loan is secured against shares in Southbury Group, and could go real bad real fast should Southbury be successful in raising capital, since it would be at a steep discount to the value of the shares used when the loan was made (and the situation appears no better if SCF and/or Southbury are not successful in recapitalising).
Chris Lee's comments, however, open up a new issue: the motivation for aggressive expansion during the last several years under Mr McLeod's leadership.Perhaps this serves as a warning for any financial institution with a history of rapid expansion: this strategy carries a high risk, and investors should be aware that even the best performing and best managed companies can get into trouble by expanding rapidly for long periods of time.
The expansion strategy has spent Mr Mcleod's strength (he was quoted as saying he had run out of petrol), but also South Canterbury Finance's, and Southbury's as well. It has probably spent Mr McLeod's personal finances as well, leaving him with a $15m debt backed by assets that have little value left.
It just amazes me how naive the public was and is still.
What does it take to wake the public up to what is really happening behind the scenes?
Oh well, there is a reason why the mum and dads continue to loose money.
Good luck.
I'm not sure its naievity - I'd describe it more as "Faith". Finance companies just seem to keep going despite the warning signs. Like for example Lachie has "run out of petrol" - What has happened that has prevented regular top ups? and what is there in front of them that is going to need a full tank of gas?
Read your earlier post. Why did SCF buy shares in public listed companies? Operative word is "did".
No two ways about it - Hubbard saw SCF as his private piggy bank to do as he pleased.
The aftermath of such reckless behaviour is there for all to see - those who want to see, anyway.
The first part of your question is yes. and yes it is the biggest loss in scf's history ( only there 3rd). as for Lachie leading them into property development, can't comment-don't know.
the last part, I got told today it wasn't 15m (but close) but it was already into shares and if it wasn't for the kind hearted person Mr Hubbard is he would have nothing.
remember AJH and wife own 75% of southby, 12.5% in trust and the other 12.5% by other business associates ( I asume including lachies) .