Investors invited to grill South Canterbury Finance
South Canterbury Finance, which is battling to restore liquidity, is to spend the next fortnight briefing investors at a series of public meetings throughout the country.
Public meetings have been scheduled for Christchurch, Invercargill and Dunedin this week, while a schedule is also being finalised for Timaru, Ashburton, Wellington and Auckland next week. (Click here for venues).
The company, founded by Allan Hubbard, owes $1.8 billion to about 30,000 investors whose money is now protected through to December 2011 under the government’s extended retail deposit guarantee scheme.
South Canterbury has undergone a series of changes to its business model and recently sought additional capital after reporting significant provisions and impairments on its $1.5 billion loan and asset portfolio.
Ten days ago Standard & Poor’s lowered South Canterbury's long-term rating from BB to B+ while its short-term outlook was affirmed at B.
Last week the company announced that Pyne Gould Corp's Torchlight Security Trustee had agreed to lend an extra $25 million to South Canterbury, increasing its total loan facility to $100 million.
However, the revised arrangement means that Torchlight, which is run by PGC shareholder George Kerr, would no longer commit an extra $37.5 million in equity in South Canterbury’s parent company Southbury Corporation.
Last year, Mr Hubbard arranged a capital injection of $152.5 million in the form of shares in Southbury’s Helicopters NZ and Scales Corp.
Plenty of questions
South Canterbury chief executive Sandy Maier said staff had been flooded with questions about the company’s structure and future, its progress with various funding streams, the ongoing role for Mr Hubbard, the impact of the S&P rating and the Crown’s retail deposit guarantee.
“This will be an opportunity to meet with our investors and answer their questions or concerns face-to-face,” he said.
“Our early focus for these meetings is deliberately in the lower half of the South Island as that is the traditional home of South Canterbury and the values of the people in those areas are at the core of the way the company was originally built and will continue to run.”
Despite some success in rolling over debentures, liquidity remains a major obstacle for the Timaru-based financier, with $1.13 billion of bonds and debentures coming due this year.
The company said last week that more than 5000 debenture holders with investments totaling close to $172 million had, by 3 June 2010, agreed to roll over investments maturing in the coming months.
The company had $80 million cash in the bank as at March 31, although S&P has said it would like to see $150 million at the half-year mark.
South Canterbury will spend about $2.25 million every month in guarantee fees when the extended scheme kicks in October.
The company’s problems stem from a loose lending regime leading up to the property market crash in late 2007.
Latest audited accounts reveal the gross amount of loans individually impaired surged to $598.24 million as at December 31, 2009, up from $293.66 million at June 30, 2009.
The charging group made total impairment provisions of $244.2 million for those impairments, including $185.2 million of specific provisions in respect of its loans.
After splitting into three separate units, South Canterbury has recovered $202 million of outstanding loans including advances to farms, property developments, and businesses during the first four and a-half months of the year.
As at March this year South Canterbury Finance's unaudited total assets were $2.1 billion at March 31 and equity was $203 million.