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South Canterbury in talks with new investor

Friday 27th August 2010

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South Canterbury Finance had its securities halted from trading on the NZX debt market pending an announcement on a new investor.

"We are close to an arrangement with new investors, and we're just putting a halt in place while the arrangements are finalised," said John Draper, a spokesman for the company.

"I can't go beyond what is in the statement."

"If you look at what has been written in the press over the last week, Sandy Meier said he wanted a recapitalisation package in place by August 31, and we have a waiver until then," he said. "We are just in the final throes of that process."

The finance company's investment statement and prospectus "are currently being amended," according to a notice of the firm's website. Hubbard has been seeking a new equity partner with deep pockets for the firm, after he poured in assets from his own holdings in exchange for more shares.

The announcement comes after the statutory managers for South Canterbury's owner Allan Hubbard flagged more concerns over the state of the businesses. Richard Simpson and Trevor Thornton, of Grant Thornton, said Hubbard's Aorangi Securities Ltd. has too much exposure to the dairy sector, leaving "significant risks" for investors, while Hubbard Funds Management is over-valued by at least 25%.

On Aorangi, Simpson and Thornton say the problem they face is that Hubbard let the vehicle accept on-call deposits and invested that cash almost exclusively in long-term loans and investments, with much of the money going into about 25 dairy farms. That created an "alarming gap" between the company's loan income and repayments to investors.

The government appointed statutory managers over some of Hubbard's interests on the advice of the Securities Commission after a complaint was made by an investor in Aorangi who claimed not to have been given a prospectus.

Since then, the decision has polarised the investing community, with South Islanders rallying around the man who has propped up much of the region's economy, while others have bayed for blood in the wake of the finance sector's collapse several years ago.

 



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