Enumerate. I think you have hit the nail in the head.
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Enumerate. I think you have hit the nail in the head.
Interview of Sandy Maier by Bernard Hickey:
Interest.co.nz
Personally, I would like to see the split into two or three that they are talking about. It makes sense, keeps the finance company going, and solves many of the problems, plus it (hopefully) allows us (taxpayers) to get out without a bath.
Alan.
Gidday
What a forthright, straight up, sort of guy.
Yes, I agree. A very impressive performance.
It seems SCF has enough capital to fund "the good bank". It seems "the bad bank" will simply be buried in George Kerr's back yard and the related party "equity investments" will float off and not require any capital at all.
I think Sandy will do his road show and will get most of the money he needs. Then interest rates will rise ... and SCF will be under very significant pressure. Whether he has the ideas, time and altitude required to restructure in time ... I think this external pressure could come on before the end of this year. Meanwhile, any of the internal pressures of bad loans, further defaults or other bad news ... could kill them instantly.
At least Maier is offering clear leadership. This is a significant, unimpaired, asset.
Yes agree it was a good performance - but really it wasn't a particulalry probing interview. A few soft questions with lengthy (but not rambling), nearl yWomans Weekly style answers.
The upshot being if you are an investor and want a governement guarantee then feel comfortable going to SCF (but don't be asking about where you're money is going). There are questions that need to be asked if you want an unguaranteed product but we weren't get the answers in that interview. He cleared up the "misunderstanding" around the BB rating and getting the guarantee (nice to know the tax payer is backing any old company on the basis of the rating at the time of application and not on any subsequent events). And the old war horse is in the office around 6.30am 7 dayas a week - which at 82 I can't help but feel a bit sad about.
Anyone care to explain why they think the SCFHAs are now rising so fast?
They were down to 22c (I think) last week, now there are bids to buy at 26c on the board.
I know I said above that I thought there would be support at or just below 20c, but I did not expect the irrational behaviour to actually increase the price.
Perhaps it is Sandy Maier's interviews and 'roadshow' - if so, just goes to prove my point about NZ investors. :p
No juicy opportunities for now at least....
Alan.
Alan.
Alan ... prob going up because 22 was so so so cheap
I have been trying to correlate what Chris Lee has to say in his most recent "Taking Stock" and Sandy Maier video prelude interview (on interest.co.nz) to the road show.
http://www.chrislee.co.nz/index.php?page=taking-stock
One key point Maier makes is that SCF will be partitioned into 3 - The "good bank", the "bad bank" and the "private equity" holdings. This structural emphasis seems to have escaped Chris Lee's notice. However, I would suggest this is a vital element of the proposed way ahead.
The "good bank" will be about a $1billion dollar entity - backed with capital appropriate to the new capital adequacy ratios.
The "bad bank" will be sold. Reading between the lines ... George Kerr's Torchlight is the most likely buyer. Presumably these negotiations are proceeding with establishing the price as the key next step (SCF have a view on the write-downs, clearly - Kerr will clearly be taking a more conservative view).
Southbury is being primed for partial float to allow the buyback of the "private equity" part of the SCF proposal.
Pardon me, but it seems as if Maier seems to be doing an excellent job. The structure makes sense. He is clearly shaping the best negotiation position possible, from what was a very weak position. He has the Southbury prospects to stiffen Kerr's keenness for the Torchlight purchase. He can have the impending Torchlight deal soften the desperation level, to the Southbury punters. He can point to the stable "good" finance company and the portfolio of "wet nosed" Hubbardite debenture holders to reduce the aura of desperation.
10 out of 10 for structure and negotiation position.
Maier has refused to put any dates on any of this. He has set NO time expectations. Very clever ... he can never be wrong ... none of the positive prospects can ever "go away" or lapse unless the counterparties make an explicit statement.
10 out of 10 for expectations management.
The continued government guarantee was the essential precondiction. The roadshow is all about influencing "thought leaders" in the investment community. This is the key to maintaining the debenture subscriptions/rollover rate. It is a selling exercise, pure and simple. Maier clearly recognises this.
10 out of 10 for the approach to securing confidence in the debenture market.
I get the sense that Chris Lee is very sniffy about Maier's achievements, to date. I don't understand this. Lee goes on and on about his "analysis" - but fundamental points of the restructure are ignored by him. Quite frankly, I cannot even follow his "analysis" on the rate of debenture rollover. There seems to be the dangerous implication in his "analysis" that no structural change is required at SCF and that things will unwind without any specific initiatives or effort?!? I find this casualness in codifying the key issues with SCF to be a serious shortcoming in Lee's "analysis". He also seemingly ignores the psychological factors which Maier, most certainly, does not.
I would love to see what Maier is doing in terms of capital planning. I fully expect that he is way too smart to even hint at what he has in his "gamebook".
Maybe Lee is a bit sniffy because Maier thinks SCF has a future independent of George Kerr or some of Lee's "grand unification" ideas. Fact of the matter is that Maier seems to be playing his hand with considerable flair and finesse. I would back Maier to pull this off - but we don't know the quality of the hand he has been dealt. Things still may be terminal.
Watch for three things:
1) the SCF debenture rollover and new subscription rate
2) the Torchlight deal for the "bad bank" assets
3) the Southbury float for the "private equity" assets
1) is a necessary condition for SCF survival - but should be reasonably secure. Either of 2) or 3) will be sufficient conditions for stability - but this is where the key risks remain.
Nice work Enumerate.
Another possibility is that they try to float off the 'bad' with the private equity. It woud be 'easier' in that it is just one 'deal', but harder in that the offering to the market is more complex.
I don't have an opinion on whether they would - just that it is possible.
Either way, the finance company is left, smaller, but properly capitalised, and with good loans in the market place.
I like it.
Maybe I'll have to pay a bit more to get back into SCFxx !
Alan.
I like the SCF010's at a 25% yield, the best.
You get a "partial" government guarantee - if the default event occurs before the end of 2011 (the debentures mature end of 2012).
The new prospectus debentures are 8%. SCF020, SCF030 debentures offer the same guarantee at about 9%.
SCFHA's are deeply subordinated, offer no guarantee and have a trust deed that has a number of potential "fishhooks" (suspending interest, perpetually, with no recourse, for example).
If SCF puts together the necessary and sufficient conditions to survive - this is not the end of the story. Interest rates will rise, this year. This will put pressure on SCF margins and on the default rate of it's existing loan portfolio. The SCFHA's are just too exposed, directly, to these pressures. Remember, the SCFHA's are either worth "nothing" or they are worth $1 - at $0.30 the market is saying there is a 30% chance of the most optimistic recovery scenarios for SCF. This may be a fair estimate (or indeed may even be pessimistic) - but at $0.30 per pref there are better "bets" elsewhere.
On the other side of the coin - buying up SCFHA's - large - should get you on Alan Hubbards Christmas card list.
Enumerate.
Yes good work.Saving companies is all about having the right people there making it work.Maier is in control.Yes he can work with Kerr and others but getting the frame work right and getting time to work it through is all of his making.
I agree - if I was going back into SCF today it would be SCF010s.
Alan.
The contrast in how this organisation is working, since Maier became involved, is remarkable.
They were late with the new prospectus. It went to multiple revisions. The accounts were late, needed to be revised. They could not communicate a sense that they were executing a clear strategy. Their negotiation position was weak - in terms of assets they wanted to sell and money they needed raise - and they didn't articulate a plan.
Recently, the performance has seemed to turn around. They seems to be executing a clear strategy - they have the sales psychology right, in terms of the strengths they do have, they seem to be positioning themselves for the negotiation processes ahead.
They are still in the woods - but, they have a plan and a leader.
I do note recent senior staff departures and change of auditor. This actually greatly encourages me, because there must be some new blood brought in to correct very serious and basic process difficulties. I am not suggesting that these difficulties were due to the people departing - but sometimes organisation culture needs to change and otherwise good people get caught up in this transformation process.
Maybe there is hope for SCF?