SCF long-term rating cut, Hubbard moves to president

South Canterbury Finance has had its long-term credit rating downgraded by two notches to B plus by Standard & Poor's but remains covered by the government's extended retail deposit guarantee scheme.

The company has already been accepted for the scheme, which goes through to December 31, 2011, and at the time it met the BB or above rating criteria for acceptance. Its current rating is now below that level.

Chief executive Sandy Maier said the company has been canvassing investors and about two thirds are indicating an intention to renew deposits. The company was pleased to be taken off creditwatch negative. The short term rating was affirmed at B.

S&P said that the balance sheet liquidity build-up, to date, had not been as strong as it anticipated and it had observed delays during the past few months.

"Specifically, we believe that South Canterbury Finance's exposure to future refinancing risks is no longer tolerable at the previous BB rating," S&P said.

Separately, South Canterbury Finance announced that Allan Hubbard, the chairman and controlling shareholder, will to become president for life and step aside as a director.

Timaru-based Mr Hubbard is 82 years old and it has been reported that he requires regular dialysis treatment.

Mr Hubbard indicated at last year's annual meeting that he intended to step aside as chairman this year. As president for life he will still attend board meetings. Directors will convene in the near future to appoint a new chairman.

Mr Hubbard said significant achievements had been made by the board and new management team in the last six months to put the business on a sound footing.

"I am confident the decisions being taken will restore South Canterbury Finance as a leading provider of finance for business development beyond the traditional banking sector," he said.

Mr Hubbard said the board and management were working to overcome the short-term liquidity issues that had arisen as an unintended consequence of the initial Crown retail deposit guarantee and secondly to find an equity partner to achieve an orderly succession and underpin the long term future of the business.

Mr Maier said Mr Hubbard would focus on seeking a new equity investor for the company.

Mr Hubbard said South Canterbury Finance had impacted the lives of many people over the years by providing resources at crucial times to support their endeavours.

"It is essential to the New Zealand economy that firms such as South Canterbury Finance are able to continue in this role,"Mr Hubbard said.

Mr Maier said that in the years Mr Hubbard has chaired South Canterbury Finance, he had transformed the business from a small local finance company into one of the country's leading players in the non-banking finance sector.

"The South Canterbury Finance story is remarkable, and a tribute to the dedication of Allan, his wife and co-owner Jean and the people who have worked with him over the years," Mr Maier said.

Timaru lawyer Edward Sullivan has also announced his retirement as a director of South Canterbury Finance with effect from May 31.