Finance Minister Bill English will update the cabinet today on the Crown's exposure to South Canterbury Finance, with the focus on minimising any bill to the taxpayer.The Timaru-based finance company owes 30,000 investors about $1.7 billion, of which abou
Finance Minister Bill English will update the cabinet today on the Crown’s exposure to South Canterbury Finance, with the focus on minimising any bill to the taxpayer.
The Timaru-based finance company owes 30,000 investors about $1.7 billion, of which about $1.5 billion is covered by the retail deposit guarantee scheme.
NBR revealed on Friday that the company has just $10.6 million of cash left as it tries to woo new equity investors ahead of tomorrow’s deadline to comply with a waiver on its trust deed.
South Canterbury needs a sizable cash injection or faces receivership this week. Chief executive Sandy Maier said the company had been in talks with up to five potential suitors.
In an announcement to the stock exchange this morning, South Canterbury said it was still in discussions with interested parties "in an endeavour to put together a recapitalisation and restructuring solution acceptable to all stakeholders."
However, the company said in view of recent media speculation "there can be no certainty that the proposals will be successfully implemented."
Reports over the weekend suggest the government may also take part in a recapitalisation by taking over the company’s impaired loans to give any new private investor(s) more comfort. South Canterbury's latest accounts reveal the company is carrying just under $600 million of impaired loans on its balance sheet.
Prime Minister John Key side-stepped the issue on TVNZ’s Breakfast programme this morning.
He reassured debenture investors that their money was safe under the guarantee and would be repaid in the event of a default.
The government had provisioned $900 million as a potential loss to the finance company sector.
"No one can argue the taxpayer hasn't stepped up," Mr Key said.
The government also wanted to minimise any loss incurred by the Crown, he said.
“If there is to be a loss and be paid for by your hard earned tax dollars we want to make sure that it's as small a loss as possible,” Mr Key said.
“In terms of what happens from there ... I'm not going to comment on that today."
Mr English will brief the cabinet this morning and Mr Key is likely to make an announcement at his weekly post-cabinet press conference late this afternoon.
South Canterbury president for life and chairman until March, Allan Hubbard said there was a deal on the table to help the firm but it would need government money too.
One of Mr Hubbard's other companies, Hubbard Management Funds, seven charitable trusts, Mr Hubbard himself and his wife, have been put under statutory management.
About 300 investors in Hubbard Management Funds have been told the company overstated its value by at least 25% on March 31, reporting non-existent investments and cash balances.
Mr Hubbard disputes the figures.
On Friday the NZX placed a trading halt on securities of South Canterbury Finance, at the company's request. The halt was put in place pending a material announcement by the company.
