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SCF receiver omits recovery estimate in first report, impaired loans double

Monday 1st November 2010

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The receiver for failed lender South Canterbury Finance hasn’t given an estimate on the recovery in its first statutory report, which may indicate how deep the financier’s problems had become.  

SCF faced a shortfall of some $315 million in its balance sheet, with net assets of $1.39 billion and net liabilities at $1.71 billion, according to the first receiver’s report by Kerryn Downey and William Black of McGrathNicol lodged with the Companies Office. The ledger fell into the red as impaired loans almost doubled to $446 million in the second six months of the firm’s financial year amid unsuccessful attempts to bring new investors on board.

Downey and Black don’t say how much they expect to recover for the government, which stumped up $1.8 billion to take sole creditor rights to the firm, though Treasury deputy chief executive Gab Mahklouf last week told Parliament’s Finance and Expenditure Committee the government’s net liability for SCF was between $300 million and $400 million after fees.

The receivers expect $6.5 million owed to employees and the Inland Revenue as preferential creditors will be paid in full, but couldn’t assess whether anything will be left for unsecured creditors, preference shareholders and ordinary shareholders.

The report shows the bulk the loan book was made up of $690.8 million of loans to businesses, $256.2 million worth of property loans, $179.6 million of loans to the rural sector, $68.6 million of consumer loans, and $25.5 million worth of advances on plant and equipment. The impairment was offset by $341.2 million of loans to charging groups.

Last week the receivers appointed Deutsche Bank NZ and Goldman Sachs & Partners NZ to oversee the sales of the financier’s lending business and investments in Helicopters NZ and Scales Corp. respectively.

As at Aug 31, the firm had $235.8 million worth of investments, including the $152.5 million tag put on Helicopters and Scales. Last week, Downey said he expects those two investments to be sold for more than face value.

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