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South Canterbury Finance says it is going into receivership, making it New Zealand's largest finance company failure. The Government has already made a payment of $1.7 billion to cover losses to investors in the company.
South Canterbury released the following announcement to the NZX this morning:
South Canterbury Finance Limited announced today that it has been unable to complete a recapitalisation and restructure.
As a result, the Company would have been unable to certify to Trustees Executors Limited, in accordance with the terms of its debenture trust deed with Trustees Executors Limited, that it was compliant with various financial covenants under the debenture trust deed for the financial year ended 30 June 2010.
Accordingly, South Canterbury Finance Limited has requested Trustees Executors Limited to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so.
A further announcement will be made by the Company in due course.
The Government has just made a payment to the company's trustees under its retail deposit guarantee scheme.
Acting Treasury secretary Gabriel Makhlouf said all depositors and stockholders on South Canterbury Finance Ltd's register of debt securities would be repaid by the Crown and they did not need to make a claim because the Trustee had done so on their behalf.
Malhouf said Treasury had now paid the trustee in full the sum owing to investors.
Treausury spokesman Angus Barclay said a payment of $1.7 billion had been made. However the Herald understands that covers all investors including some ineligible for payment under the guarantee.
It is understood Treasury wished to make a single payment early in the process to avoid paying out interest to investors.
The NZX has just announced that it has suspended trading in all South Canterbury Finance Securities. This suspension will remain in force until further notice.
SCF owes investors about $1.7 billion, and has been trying to put together a deal with new backers, but warned yesterday there was no certainty that recapitalisation and restructuring proposals would be successful.
It has about NZ$1.4 billion worth of debentures on issue and about 28,000 investors. It also has NZ$250 million worth of bonds listed on the sharemarket.
The company had needed to raise at least NZ$180 million worth of new equity by today to bring it back in line with its Trust Deed after receiving a waiver to a breach from trustee Trustees Executors earlier this year.
The company, one of New Zealand's biggest non-bank institutions, is part of the Government's Retail Deposit Guarantee Scheme which ensures investors will get their money back, with interest.
The company's receivers will now begin the process of realising the company's assets in order to repay investors.
South Canterbury chief executive Sandy Maier is going to hold a press conference at 11am in Christchurch.
Before the announcement was made, Maier told Radio New Zealand the decision would surprise people, and that there would be winners and losers. He also said it will probably be misinterpreted and take several days before people realised what it meant.
Finance Minister Bill English is holding a press conference on the issue at 1pm this afternoon.
Prime Minister John Key said if SCF went into receivership the liability could be around $600 million, although that would be offset by assets which would be sold or wound up.
There is $900 million in the scheme, calculated to be enough to cover all the companies which signed up to it.
NZ HERALD /NZPA/ INTEREST.CO.NZ
