South Canterbury Finance bailout on cabinet agenda
As well as grappling with financial issues presented by the Canterbury earthquake, the cabinet is also today likely to come up with a clearer picture of how much the bailout of South Canterbury Finance will cost taxpayers.
South Canterbury was put into receivership last week and the government immediately paid out $1.7 billion to investors and in a loan to the receivers under the deposit guarantee scheme.
The company has significant assets and Prime Minister John Key said today there was already interest in them from buyers.
"Numbers get bandied around that the taxpayer is going to end up paying for $1.6 billion or $1.7 billion – that isn't right," he told TVNZ's Breakfast programme.
"There are a lot of assets in South Canterbury that can and will be sold, and there has already been a lot of expressions of interest to buy those assets. So the final number that will cost the taxpayer is considerably less than $1.6 billion."
Mr Key said $900 million was put away for the deposit guarantee scheme, and it needed to be noted that companies had paid "hundreds of millions of dollars" to be part of the scheme.
"So the net cost to the taxpayer will be quite small and we will probably quantify that this afternoon. But it's a lot less than people think ..."
He said the situation also needed to put in the context that without the scheme, the collapse of finance companies would have happened on a much larger scale.
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Comments and questions17
Whats the estimate for Allied?
Hopefully John Key will be honest and advise that the cost to taxpayers is only about $400m to $600M if they sell the company soon or it will become an $800m problem.
He also needs to stop focussing on Alan Hubbard who had no financial gain from this receivership and focus on the likes of Mark Hotchin, Jock Hobbs and Brian Fitzgerald ( of Hanover and Strategic Finance fame ) who although not part of the Government guarantee scheme have left complete disasters which will cost investors up to 90% of their money- whilst the directors and consultants of these companies have benefitted financially at the expense of investors.
So John Key needs to own up to the true picture on SCF and move on and stop crucifying and bullying an 82 year old man who was trying to do his best - and yes he did make mistakes - but who doesn't
It is SHOCKING to know how this finance company was monitored over the years!
Perhaps there is worse news to come, when they untangle all of those trusts too, as by the look of it, he will not be able to steal funds from one, and put it into the other.
Looks as though all of these financial people are tainted, with the same leaded pencil?? are there any Finance Companies left?? are they all completely over valued and BROKE!!!!!!
Why didn't they sell it to the highest biddeer last week?
It would have been cheaper and kept alive the company to rebuild and serve NZ business.
It will be interetsing to see how much it is finally sold for and the net effect on the Govt Guarantee scheme. It will also be interesting to see how politically this has cost the Govt after being so vocal about Alan Hubbard - not a smart move whether they are right or wrong as half the public will always support the man because of his past good deeds.
You can talk about NZ finance companies and Nigerian financial windfall scams, in the same breath. You truly can.
maybe the fools in wellington should also discuss how they forgot about "unintended consequences" on the use of the govt guarantee - IE how a business that was already buggered by poor management and lending policies was effectively allowed to see substantial growth by using a tax payer funded back stop
It is time to report how much the Government has raked in from the Government Guarantee Scheme premiums compared to the cost to date and the potential net cost against it from the SCF debacle. Who knows, the government may profit from it. Even SCF must have been paying at least $18million per annum into it. Facts before wild taxpayer cost estimates please
We are going to run out of money.
Crush Hubbard's beetle, someone.
What ever the rights and wrongs of SCF and the subsequent bailout we have for the very first time seen absolute leadership and decisive decision making from John Key and Bill English.
No delays, no testing of public opinion to maintain the popular approach, no waiting on some report. Bang, decision made and get on with it. This is what we expect from the men and women at the top.
Lets now transfer this approach to new liquor laws and driving, taxation, welfare etc.
The attitude of Mr Hubbard himself also leaves a lot to be desired.
Following South Canterbury’s failure he claimed that he could have saved the company if he hadn’t been sidelined, blaming the government for putting him in statutory management.
But as reported in the NBR print edition today, former South Canterbury director Stuart Nattrass has pointed the finger at Mr Hubbard, saying his refusal to dilute his shareholding by raising capital contributed to the company’s demise.
“The strategy Allan was pursuing was too large and too ambitious for its capital structure,” he said.
Compared to other bosses of failed finance companies such as Rod Petricevic and Eric Watson, Mr Hubbard has been given a relatively easy ride by the media and general public until now.
But he was doing the sort of related-party deals these other men of finance have been given a hammering over.
He still has plenty of support in Timaru but Mr Hubbard WILL STRUGGLE to find much in the rest of the country.
well he tried failed and has stayed to face the music .Not like bob Jones and many others whom took their pickings and ran,
That comment from Stuart Nattrass is a bit rich - he was a board member and also had considerable private loans on favourable terms - and not guaranteed like other borrowers.
Best for Stuart Nattrass to stay quiet unless he wants to embarrass himself.
The unfortunate synchronicity is just amazing.
The moment the government bails out South Canterbury Finance with public money to the tune of 1.7 billion, virtually the estimated figure the Christchurch earthquake will cost the government. Er make that the taxpayer.
PIty the poor bunch in Christchurch who never had insurance on the homes. Apparently there will be no bailout for them. And their unhappiness will become the unhappiness of those around them for sure in the not too distant future.
The synchronicity is amazing. The moment the government bails out South Canterbury Finance with public money to the tune of 1.7 billion, virtually the estimated figure the Christchurch earthquake will cost the government. Er make that the taxpayer.
PIty the poor bunch in Christchurch who never had insurance on the homes. Apparently there will be no bailout for them. And their unhappiness will become the unhappiness of those around them for sure in the not too distant future.
It will not cost the Govt or tax payers for the Earthquake payout, as it is funded by all insurers, by the Earthquake premiums which are a part of all normal insurance premiums, but in saying that, I would expect the Govt to chip in with something.
Apparently the Earthquake slush fund is awash with assets of some 15 billion, but someone will step in and bailout the tyre kickers, who do not pay for insurance, and I think there could be more of those than you would imagine, there will be a few sad stories out there watch and see.
I wonder how many mortgages are not covered by an insurance policy?? no doubt we are about to find out.
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