Sth Canty $191m in the red, but still optimistic

Sandy Maier, chief executive of South Canterbury Finance

South Canterbury Finance's loss has reached $191 million for its half-year but the Government-guaranteed firm says it is still a viable business.

The embattled finance company, which owes more than $1.9 billion to investors, released its accounts for the six months to December 31 late on Friday, nine days after they were supposed to be posted on the New Zealand stock exchange.

Last month, South Canterbury issued a preliminary report predicting a net loss after tax of $154.9 million.

The $191 million loss is nearly four times the $52 million loss the company made in the previous corresponding period.

Yesterday, chief executive Sandy Maier said the company had made a call on the loss a month ago and had got it wrong but new equity in the business meant it would continue.

"We have replaced all the capital. It can keep going."

Maier said auditors had taken a tougher line in some areas and the company did not necessarily agree with what was in the accounts.

The increased loss includes an increased impairment on its property loans and a $21 million fee it had to pay to United States investors after having to repay a $153 million private placement earlier than expected because of a downgrade in its rating.

Maier said the fee was paid by Southbury Corporation - the investment company of businessman Allan Hubbard and the parent company of South Canterbury - and it had assumed the figure would not need to be in the South Canterbury accounts.

A big chunk of the loss had also come from its property book, Maier said.

The company has been forced to increased is provision for potential losses to $194 million.

But Maier said once that was taken out of the equation the company had a break-even year - better than many other finance companies.

The accounts also reveal numerous changes made to previously audited figures. Last year the firm changed from a small South Island auditing company to Ernst & Young.

Maier said some of the changes were made because the previous auditors and management had not been as tough as those who replaced them.

Last year, the company's chief executive, Lachie McLeod, and its chief financial officer left the business.

Maier said he did not want to lay the blame on the previous management but people could be confident in the firm because there had been change.

"But it doesn't make the accounts look pretty."

The company's equity had also shrunk from $244 million in July 2008 to $55 million but Maier said the recent $152.5 million put in by Allan Hubbard and an investment by George Kerr's Torchlight fund of $22 million had almost brought it back to where it was.

South Canterbury Finance is part of the Government's deposit guarantee scheme and was accepted into the Government's extended scheme just before Easter.

The extended scheme takes effect from October 12 and runs until the end of next year. If the company fails during that time the Government will repay investors.

Maier said South Canterbury expected to issue a new prospectus today to raise more money.

The accounts say the company hopes to roll over about 50 per cent of its current debentures as they mature and attract $380 million of new money in the next year.

Maier said he did not believe the company would have any problem meeting those targets, as it was hearing from hundreds of callers every day asking when they could invest.