Code kept SCF collapse secret

Kerryn Downey thinks the receivership could take up to three years. Photo/ Sarah Ivey

The man in charge of South Canterbury Finance's receivership says he allocated a secret name to the company in August last year to help keep its potential collapse under wraps.

Kerryn Downey, a partner with Auckland insolvency firm McGrathNicol, and his colleague William Black were appointed to run the country's largest ever receivership on August 31 .

But Downey, who has more than 30 years' experience in corporate recovery, was first put on notice in August last year.

"I had a call on a Friday from a lawyer at Buddle Findlay [the law firm of SCF's trustee Trustees Executors]." He immediately allocated a top secret name - "project sweep".

While born and raised in New Zealand, Downey also spent 24 years working in Canada.He linked South Canterbury to the sport of curling and, because the project name needed to start with the same letter as the company's name, he chose sweep.

The name continued to be used until recently for confidential talks with investment bankers.

The initial call put McGrathNicol on the reserve list and meant the firm could not take on any work related to SCF to remain independent.

But by December Downey was off the list again after Sandy Maier was hired to try to get the company into shape for a recapitalisation.

He now knows SCF nearly ran out of cash just before last Christmas and began knocking on the door of businessman George Kerr for money.

In April or May of this year he received another call from Trustees Executives chief executive Yogesh Mody when SCF reached code red before cooling to orange status.

"Maier was very good at raising money and the company was stabilised again for a while. However, June 20 hit and we got the call to get ready." That day statutory managers were appointed to Allan Hubbard and seven of his trusts. SCF stayed outside of the statutory management.

While Maier remained successful in rolling over existing debentures, the flow of new money began to dry up and that was very bad news, Downey says.

He started by sitting down with Maier before briefings with senior management. In the first week he was also dealing with a second offer from Permanent Investments which was turned down by the Government.

Since then he has flown to Christchurch every week and spent five out of seven days working on the receivership. McGrathNicol has a team of up to 11 staff working on the receivership and is even using some staff based in its Sydney offices.

So does he feel any greater pressure to recoup the $1.775 billion already paid out to SCF depositors and creditors knowing he is working on behalf of the Government and ultimately the taxpayer?

"I get that question from some of my friends and employees and cab drivers will ask that too. But we just do the best job we can under the circumstances, whether it is the Government or the Bank of New Zealand."

He says the distinguishing feature compared to most other New Zealand receiverships is the size of SCF.

Treasury reports have estimated the receivership could take four years but Downey believes it will be more like two or three years.

"The timeframe is really dependent on the sales process which is dependent on how quickly the market can absorb the assets for sale."

Downey says he could have the assets sales of Helicopters, Scales Corporation and SCF's "good bank" done by June next year.

Will he get all of the money back?

"I am going to do my level best to get the absolute top dollar for the business. That is my mandate - whether we succeed in getting the Government completely out - it's too early to tell."

Kerryn Downey

McGrathNicol partner and receiver of South Canterbury Finance

Age: 63

Born: Gisborne, grew up in New Plymouth.

Education: Bachelor of Commerce and Administration at Victoria University, Wellington, Chartered Accountant, trustee and bankruptcy licence.

Career: Joined Wilberfoss (a founder firm of Ernst & Young) in Wellington in 1969 and worked in Canada with EY until 1982. Joined KPMG Toronto in 1982 and returned to NZ in 1998 to lead the KPMG Auckland corporate recovery practice. In August 2004 McGrathNicol acquired the corporate recovery practice of KPMG in NZ and Australia.

Family: Married with three sons. The man in charge of South Canterbury Finance's receivership says he allocated a secret name to the company in August last year to help keep its potential collapse under wraps.