Global bank buys $123m SCF loan book
South Canterbury Finance receivers have sold another chunk of the failed lender’s business but the return to the taxpayer has been kept confidential.
Japanese investment bank Nomura has acquired South Canterbury’s consumer, business and rural loan portfolios – the last of the so-called “good bank” of assets.
The three loan portfolios have a combined book value of approximately $123 million, receivers Kerryn Downey and William Black of McGrathNicol said in announcing the deal today.
However the actual purchase price was kept secret.
Mr Black said the sale represents “an excellent outcome and is another important step in maximising the return for the Crown when combined with the other sale processes completed to date and loan recoveries made during the receivership.”
There has been speculation in the market that Nomura paid about $80 million for the loan book, or about 70c in the dollar. Other sources have suggested it was sold for as little as $35 million.
Mr Black dismissed the speculation.
“The price is confidential. But that figure you just mentioned is wildly inaccurate,” he told NBR.
He said there would be more transparency around recoveries when the next receivers report comes out in October.
South Canterbury Finance was tipped into receivership last year, triggering a $1.7 billion payout on the government's deposit guarantee scheme.
In April the government said the net cost of retail deposit guarantee had been raised to $1.2 billion from an earlier estimate of about $900 million, mainly due to lower than-expected recoveries from related party loans at South Canterbury.
This latest sale represents the last of South Canterbury’s more saleable assets and follows sales of Face Finance, Helicopters NZ, and shares in Scales Corp.
Once third party debts are stripped out the four asset sales have brought in about $360 million, although Mr Black would not give a figure.
He said it was important to realise that recoveries had also come through loan repayments.
In April the receivers said they had recovered $299.69 million in receipts, including $238.7 million of loan book realisations.
Collections came from scheduled principal and interest instalments, early repayments and settlements.
A further $59 million of intercompany loans were recovered.
However, there have also been plenty of outgoings including new loan advances of more than $50 million under new, more stringent lending criteria.
Mr Black said he was comfortable with where the receivership was at after one year.
“I’m not privy to whatever provision the government has made but we’re certainly on track. Our role is to achieve best price we possibly can.
“We’ve got four significant transactions completed in 12 months. We think it’s a pleasing outcome and we're going to keep progressing as efficiently as we can to finish off the receivership.”
Remaining assets included South Canterbury’s bad bank, made up of mainly property loans that could take another two years to work out, and the sale of South Canterbury’s stake in Dairy Holdings.
The latter is complicated by legal action taken by 16.7% Colin Armer, who has alleged underhand tactics by McGrathNicol.
Smaller deals include the recent sale of Financial Synergy Limited.
The receivers are also close to finalising a sale of Commtest Instruments, a Christchurch technology company that uses vibration technology to monitor machinery.
NBR understands there is some litigation to be settled in the US but a sale is expected to be completed soon.
South Canterbury sunk nearly $27 million into Commtest, with outstanding loans at the time of receivership approximately $15 million on top of a $12 million equity investment.
Mr Black said the good bank initially attracted 90 bidders and was eventually weeded down to five final offers.
Deutsche Bank AG New Zealand branch acted as sole financial advisor to the receivers.
Nomura’s head of fixed income in Asia Jai Raipal sought to reassure South Canterbury’s underlying borrowers and businesses that their loans will continue to be managed from Christchurch.
“This acquisition provides Nomura with a platform from which to lend and invest in additional opportunities in New Zealand, which has a robust, well-managed economy,” he added.
South Canterbury is subject to a Serious Fraud Office Investigation of certain related party loans while former chairman and majority shareholder Allan Hubbard faces 50 charges laid by the SFO in relation to separate companies Aorangi Securities and Hubbard Management Funds.