English delays trip to handle SCF fallout

Allan Hubbard Photo / The Listener

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.

Mr Key this afternoon confirmed the Government has had discussions with potential new investors in stricken South Canterbury Finance but will not say whether any such deal involving taxpayer funds will proceed.

Unless Timaru businessman Allan Hubbard's $2 billion finance firm either finds a new investor or secures breathing space from its trustee, it may be placed in receivership tomorrow triggering a $1.55 billion call on the Government's retail deposit guarantee.

Amid speculation of a bail-out package involving overseas investors and the Government, Mr Key yesterday confirmed deals had been presented to the Government "from a number of parties".

"I haven't seen all of them and I'm not familiar with their inner workings but there have been parties that have been interested'', he said.

"But if you go back to the tests that the Government wants to meet, it's important to understand that one of those tests has to be minimising the cost to the taxpayer. We couldn't in all good conscience accept a deal that made that position worse or put the taxpayer at greater risk."

Mr Key said the Government had thought "very carefully" through its objectives as it dealt with the prospect of South Canterbury's failure, and investors covered by the retail deposit scheme "can take comfort they will be repaid in the event of some collapse at South Canterbury".

The Government's other objectives were minimising the cost to the taxpayer and minimising any disruption to the wider economy.

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.

- with NZ Herald staff, BusinessDesk