English delays trip to handle SCF fallout

Finance Minister Bill English. Photo / Brett Phibbs

Finance Minister Bill English has postponed his departure overseas to deal with issues that could follow tomorrow's announcement on the future of South Canterbury Finance, Prime Minister John Key said today.

The ailing company has until 5pm tomorrow to find a way out of its problems, or face receivership.

It has been trying to find new backers, but said earlier today there could be no certainty that recapitalisation and restructuring would be successful.

South Canterbury Finance (SCF) owes 20,000 investors about $1.7 billion and is believed to be running out of cash to pay investors and meet statutory requirements.

Mr Key gave an assurance today that if the company failed, investors would be protected by the Government's Retail Deposit Guarantee Scheme.

He said the Government could face a potential liability of about $600 million, although that would be offset by the company's assets.

Mr English had been due to leave tonight for Hong Kong and Singapore.

Meanwhile, the Serious Fraud Office says it will continue its probe into the affairs of Timaru businessman Allan Hubbard, following the release of a statutory manager's report last week.

SFO chief executive Adam Feeley said information obtained from its own investigation into Aorangi Securities and the statutory managers report meant further investigation was necessary.

"Our initial inquiries focused primarily on matters raised by the Registrar in connection with investors funds deposited with ASL (Aorangi Securities Limited), but it has become apparent that there is considerable overlap between ASL and the investments in HMF (Hubbard Management Funds). Our further inquiries will be considering both these and related entities."

Feeley said the SFO will move "as swiftly as possible," but won't compromise the integrity of the investigation.

There were several interviews and considerable financial analysis to be done before a further report will be completed for consideration, he said.

The Government put Hubbard and his wife Margaret under statutory management on June 20, with seven charitable trusts, Aorangi Securities, and later, Hubbard Management Funds.

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.

The news comes as Hubbard's South Canterbury Finance fights for its survival, with the deadline to find a new investor looming as its trust deed waiver expires tomorrow.

Though SCF was specifically excluded from the statutory management, the turn of events has kept reinvestment rates under pressure, though the lender did manage to get through a $500 million wall of maturities at the end of June.

Meanwhile a report released last week by statutory managers Grant Thorton said investors in Hubbard's Aorangi Securities were unlikely to see any significant return of capital until next year, at the earliest, but a small payment may be made during October.

And about 300 investors in Hubbard Management Funds (HMF) were told the company overstated its value by at least 25 per cent on March 31, reporting non-existent investments and cash balances. HMF assets were worth only $61 million at the end of March, not $82 million as stated.

Many of Aorangi's loans are to about 25 dairy farms and Grant Thornton has estimated only 17 loans out of 51 will meet their September 30 deadline interest payment obligations - a shortfall of $1 million, or 50 per cent of what is due to Aorangi investors.

NZPA, NZ Herald staff and BusinessDesk