Pressure on South Canty to put plans to investors

Lachie McLeod. Photo / Supplied

Time is running out for Allan Hubbard's South Canterbury Finance to announce its recapitalisation plan, new cornerstone investors and a new prospectus, warns prominent financial advisor Chris Lee, who has substantial client funds tied up in the company.

However, the company says it is mindful of the need for greater certainty around its plans and says it will have good news within the next two or three weeks.

South Canterbury's credit rating with Standard & Poor's was this week placed on CreditWatch Negative for the second time in just a few months. The country's largest locally-owned finance company went on to lose its investment grade BBB- rating last month after being placed on CreditWatch Negative in July.

On Monday S&P said South Canterbury's present BB+ rating, the minimum grade required for the government's retail deposit guarantee beyond October next year, was in jeopardy.

S&P analyst Derryl D'silva said: "Our concerns centre on increasing pressure on liquidity; still-weak asset quality; and governance matters including, but not limited to, related party exposures. Since its ratings were lowered, SCF has ceased allotting securities under its existing debenture prospectus."

Negative developments including market guidance of an increased full year net loss and the resignation of two directors had occurred "against a backdrop of a major restructuring and recapitalisation initiative that SCF has said it will announce in coming weeks. The CreditWatch action reflects our view that, with no debenture prospectus in the public domain, South Canterbury's funding flexibility and liquidity are undermined at the BB+ rating level, at least in the short term."

Lee said yesterday the company needed to deliver its recapitalisation plans, audited accounts and new prospectus within the next two or three weeks to avoid greater loss of confidence.

"If they can't it would be very, very bad news for them.

"In my opinion their loyal investors will be keen to hear that all questions will be answered within the next couple of weeks. If they're not answered or answered wrongly then there will be a great deal of stress ... the pressure on them would be so immense that it might damage their brand indefinitely."

Yesterday, South Canterbury Finance chief executive Lachie McLeod said the focus at the company had come off its recapitalisation and was now largely directed at getting sufficient information to its auditors to finalise the accounts which would in turn allow it to get its new prospectus registered.

"We need to get the money coming back in again obviously and get on a firm footing then we can announce our capital raising, new directors and the game plan but we can't do that until the prospectus is up and live."

McLeod was hopeful of having the new prospectus finalised "some time next week".

Beyond that, the recapitalisation plan and other issues would be addressed "absolutely" within the next two to three weeks.