1 Sep 2010

Maier wants SCF to survive intact

7:31 am on 1 September 2010

South Canterbury Finance (SCF) says the Government is likely to get the most value from the failed company by keeping it together, rather than selling it off in parts.

The South Island lender was placed in receivership on Tuesday, after it failed to attract fresh capital to rectify a breach of its trust deed.

SCF chief executive Sandy Maier negotiated with potential investors until a few hours before pulling the plug on Tuesday morning.

He still stands by the company, and says it should survive intact.

Some potential investors were interested in buying parts of the business, Mr Maier says, but he believes there's more value in selling it as a whole.

Investors protected under scheme

The firm's 35,000 investors are protected under the Crown's Retail Deposit Guarantee Scheme, and will receive $1.6 billion in total over the next couple of months.

The Government will also pay an extra $175 million to the receivers, McGrathNicol, to repay creditors like ACC, Inland Revenue and George Kerr's Torchlight Fund.

That will give the Government effective control of the company, which Finance Minister Bill English says will make it easier for the receivers.

The Government hopes to claw back more than $1 billion over the next three to four years, as the receivers sell assets, though that will still leave the taxpayer $600 million out of pocket. Mr English says there won't be any fire sales.

Best option, says Gaynor

The executive director at Milford Asset Management, Brian Gaynor, says receivership is the best option, as unlike the cases of some other failed finance firms, nearly all investors will get their money back, and not be left in limbo.

Mr Gaynor says that while it's too difficult to put a value on SCF, there will likely be interest in some of its assets.

He says that while the failure will be a shock for some, particularly for SCF's South Island supporters, it's not necessarily a bad thing, especially for its borrowers.

Business as usual for Scales

The country's largest apple grower and exporter, Scales Corporation, which is 80% owned by South Canterbury Finance, released its full-year results on Tuesday.

Scales reports a pre-tax operating profit of just over $10 million for the year ending June.

The company says it is business as usual, as it is not part of SCF's receivership.