Thursday 14th April 2011 1 Comment
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The Crown fielded a number of proposals to recapitalise South Canterbury Finance (SCF) or buy it before and as it collapsed but most involved some form of Crown support, according to documents released today.
The finance company owned by Southbury Group, which is majority owned by Timaru businessman Allan Hubbard, collapsed in late August, triggering payments by the Crown of approximately $1.6 billion to depositors under the Crown's retail deposit guarantee scheme.
Treasury today released 200 documents relating to the finance company, adding to documents it had earlier released and documents the Reserve Bank of New Zealand has released.
The documents released after requests under the Official Information Act have many deletions of commercially sensitive information.
A Treasury report on July 21 said officials had been approached by SCF and another party, whose name was deleted, with a proposal to recapitalise SCF.
The proposal was not formally offered at that stage. The investor wanted to acquire SCF and subsidiary companies, excluding the impaired assets, for nil consideration while the Crown underwrote the majority of expected losses on impaired assets. Treasury said receivership would deliver better fiscal outcomes for the Crown.
"From a business incentives perspective any government support of this kind would alter incentives upon firms to seek private sector solutions over government ones," Treasury said.
On August 18, a party, whose name was deleted, proposed that an acquisition vehicle be set up to buy SCF's assets with funding coming 50:50 from the Crown and the investor. Quality banking assets would be onsold and the acquisition vehicle would work the remaining assets out over five years.
Crown capital would carry the "first loss" and the private capital would have rights to a rate of return.
In September, Paul Dyer, the economic adviser in the Minister of Finance's office, fielded a call from someone representing a Hong Kong-based group, which was interested in purchasing the group in its entirety, including problem assets.
Their ultimate interest was to become established in New Zealand and seek a banking licence.
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