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South Canterbury faces $1.1 billion in redemptions this year

Friday 12th February 2010

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South Canterbury Finance must roll over more than $1.1 billion of debt this year, ahead of the expiry of the first version of the government's guaranteed deposit scheme, the Good Returns website reports.

The investment statement accompanying the company's stock and deposit offerings says $491.2 million is due to be repaid by the end of June and a further $650.5 million falls due before the government's retail deposit guarantee scheme expires in October. 

A new version of the scheme will run for a further year, but at much higher costs for lower rated entities such as SCF, whose BB+ credit rating with Standard & Poor's is on "credit watch with negative implications.

In addition, US$17.5 million falls due to US noteholders at the end of next month.  SCF is undertaking restructuring through stock and deposit offers and asset sales, to improve its liquidity position after its most difficult 18 months since the Great Depression.

"There is a risk that South Canterbury Finance may not be able to raise the money required for its lending and investment activities, nor the funding required to repay its indebtedness, from the issue of debt securities in the ordinary course of its business or from external funding sources such as banks,” the investment statement says. “This is particularly the case if it is not accepted into the Crown's extended deposit guarantee scheme."

As at Feb. 10, the company had cash on deposit of $79 million and realisable assets of $12 million, and the company's loan book was about $1.7 billion before impairments as at June 30.

Investors have continued to demonstrate confidence in SCF and Hubbard, with about 55% of deposits rolling over after release of a new prospectus in October. Deposits stood at $34.9 million on December 31, from $29.17 million at June 30.

The company expects to post a first-half loss after further writedowns and provisioning for bad debt.

The company had its $100 million banking facility cancelled last year, and has fully drawn down on a $75 million facility with George Kerr's New Zealand Credit Fund, which was used to repay American investors. It may revisit banking facilities once it has completed its restructuring and recapitalisation plan.

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