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http://findarticles.com/p/news-artic.../ai_n52405069/
Something strikes me as not quite right in this analysis. Scales was the holding company for Alan Hubbard's farming interests was it not (I guess it still is if Hubbard retains a 20% stake)? So why is land in the form of these farms given a 600% risk factor when money leant against other peoples farms under 'property' given a 350% risk rating?
All SCF has to do to greatly decrease risk 'on paper' is to paper shuffle these Scales farms out of corporate ownership and into direct ownership, with Hubbard himself as a 20% partner. That would be $400m odd off the 'risk rating of assets' at the stroke of a pen by doing, in effect, nothing.
I am not sure when the valuation on these farms were done for SCF balance sheet purposes. But a quick glance at one of the business papers this week revealed an article quoting PGGW Real Estate on farm values. The gist of the article was that South Island farmers had already taken the correction of Dairy Farm property values from their peak (down 20-30%) whereas North Island farmers had yet to take their medicine. I don't know what proportion of SCF lending was made to South Island farms verses North. But I'm picking that most of the lending would be on South Island farms. That means there may not be any more 'valuation skeletons' in SCF's closet.
Also should not the cash assets and government stock , rather than be given a 'zero to low rating', be used to directly offset preference share debt for the purposes of this capital adequacy calculation?
For these reason I would say Bruce McKay's table is probably unnecessarily pessimistic. Yet if SCF is indeed about to sell off some stuff durinng a forced sale cheaply, perhaps it is time to keep some capital aside and await a float?
This all seems so obvious, I feel as though I must have missed something? Have I?
SNOOPY
The other dimension of this capital guarantee is that even if SCF preserve BB counterparty risk - the guarantee premium is 1.5%!! They would have to be AAA to make the guarantee margin affordable.
I would suggest that SCF release two generations of secured debentures - one with the gov't guarantee and one without - the difference being the 1.5% interest margin subtracted from the former but paid to the punter in the latter. It would be fascinating to see how NZ fixed interest investors voted with their capital.
I see that the wholesale guarantee will lapse in April. Dealing retail with NZ finance companies, you are "government guaranteed" (or at least some of them) - dealing wholesale with NZ banks, no guarantee.
The retail version should never have been enacted. It guaranteed stupid risks with tax dollars and it is now damaging the finance sector recovery.
Another fabulous policy misstep from the mandarins in Treasury!
Almost inevitable that SCF's perpetual pref share holders are going to have t accept a restructuring of their pref shares into ordinary shares as part of a major capital restructuring.
NBR carried an article which showed that Hubbard's Southbury got $16.5m round robin payment from SCF (in addition to the $10m) from the Helicopter and Scales 'capital' injection. Not disclosed as it was considered immaterial! The spin continues with this company which has yet to learn that it is best to be frank & transparent.
snoopy
I think farming interests are elsewhere. scales used to hold coolstores,shipping and apple interests, but been a few years since I held.
http://www.stuff.co.nz/business/indu...scue-Strategic
SCF a white knight for Strategic? Don't think so. Frying pan to the fire for Strategic debenture holders and why would SCF want to take on more property development loans? What some may see as an equity injection others might see as just another load of old rope...
Exactly. SCF cannot get its own house in order, let alone be white knight for Strategic! After Allied Farmers/Hanover, most trustees ad investors can see the folly of converting debt into equity.
Chris Lee clutching at straws now that SCF could very well muddle on through to Nov 2010, and then have the plug pulled if it cannot get its equity injection.
Why doesn't Chris Lee simply keep his mouth shut?Quote:
Originally Posted by Snapper
Like Don Quixote, he is off tilting at windmills - reorganising large mounds of decaying property loans and the debentures which funded them.
Under the retail guarantee scheme ... it will be the government who collects together all these moldering debentures - paying them out at face - and being left with the massive insolvency task of sorting our all the mare's nest of decomposing assets.
The private sector is not interested. Those remaining financial sector organisations do not need massive equity injections in the form of dead loans. The ALF lesson is that this type of deal simply destroys the reputation and integrity of the entity taking over the loans.
If SCF moves on Strategic it is because they imagine their choice to be either "falling together" or "falling over" as separate organisations. (a la Trans Tasman Properties - Robert Jones Investments and Seabil).
You may be right Percy. I am an interested observer rather than a holder myself. So I would be interested if others know how the Hubbard dairy farm interests are tied into South Canterbury Finance now. I am just assuming they are because of the 'forum/blog baying' that seems to indicate that Hubbard has done everything he can to help out SCF, the implication being that the 'Hubbard cupboard' is now bare.
SNOOPY
SCF bailing out Strategic
Echo's of 2006 from this post back then by lambton
I wouldn't rely on Mr Hubbard to save the poor old Provincial investors. He will cherry pick alright but at his price which won't be $ for $. As for investment advisors huffing and puffing saying they're going to rescue the coy from the arms of the receiver. Give me a break. This is grand standing - merely keeps angry investors at bay for now. Ha wont be long before investors are baying for blood. I wouldn't be one of the many investment advisors(and there were heaps sucking from the Provincial tit as far as I can make out - CL included) for all the tea in china. After all if they were doing their job properly and did better screening in the first place, lacking investor support from the advisor community, Provincial would not have grown as fast and large as it did.
Sad really ... 4 years on and things aint changed ... even then SCF was mentioned a lot on 'So Which Finance Company is Next" thread
Strategic looks even sadder when considering that Provincial investors managed to recover 92.5c in the $ (from memory). Though no one's laughing, it is kind of ironic.