SCF problems loans to shift into 'bad' bank in restructure; asset sales flagged

Monday 12th April 2010

South Canterbury Finance has dropped its biggest hint yet as to how it will restructure its businesses, flagging a ‘bad’ bank for problem loans and asset sales in its latest prospectus and investment statement.

The Timaru-based lender today released audited first-half accounts showing a net loss of $198.6 million, worse than the unaudited $154.9 million loss it announced on March 1. It plans to split into three separate entities, one of which will take on all of the company’s non-performing and impaired loans, as well as the majority of its $237.9 million net property loan book.

Another unit will hold all the firm’s investments including Helicopters NZ Ltd., Scales Corp., Dairy Holdings, and South Island Farm Holdings, worth a combined $296.8 million. Any asset sales in the coming nine months to help meet maturing debenture repayments will come from this pool. The third unit will be its finance company operations.

The separation plan has echoes of Pyne Gould Corp.’s move to parcel the bad loans of its Marac Finance unit into Perpetual Asset Management, an asset management arm that will seek to recover the value of the loans.

Chief executive Sandy Maier said the hard work had now been done, and taking out the one-off hits from restructuring and providing for impaired loans, South Canterbury was now a “break-even business.”

“I think everybody should be delighted – we’ve got everything out on the table in terms of the accounts,” he said.

The new prospectus also comes after South Canterbury was accepted into the government’s extended retail deposit guarantee and Pyne Gould investor George Kerr’s Torchlight Fund pumped in $22 million via Allan Hubbard’s Southbury Corp. and investors continued to support the finance company by rolling over their investments.

South Canterbury is seeking to raise as much as $50 million through deposits that aren’t covered by the government’s retail deposit guarantee.

For those deposits that will be covered by the extended scheme, the finance company is offering 8% annual interest for 12-month to 20-month deposits. It expects to roll-over about half of its existing debentures as they mature, and anticipates selling about $380 million of new debentures in the coming year.

The next task for Maier is to untangle the related party transactions of the business as it moves to finalise its restructuring – something he acknowledges will be difficult.

Businesswire.co.nz

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