SCF back in business as lender to aid sale

Photo / Dean Purcell

South Canterbury Finance is back in business and hopes to lend out $72 million a year to consumers and established business customers as part of plans to make it easier to sell, its receivers say.

McGrathNicol's Kerryn Downey and William Black yesterday released their first report on the failed finance company since being appointed to manage the receivership on August 31.

Their 60-day report reveals a $314 million shortfall in the accounts with South Canterbury Finance's $1.7 billion in liabilities outweighing its $1.39 billion in total assets.

Of its $1.56 billion in loan advances, $446.2 million worth were impaired and $341.2 million loaned out to one of 13 other companies in South Canterbury Finance's charging group as of August 31.

Downey said that since then there had been some further adjustments for provisions. "But it's not a lot," he added.

He said the $314 million shortfall was just one part of the business and all 14 reports needed to be taken into account to get a full picture of the group.

Last week Treasury deputy chief executive Gab Mahklouf told Parliament's finance and expenditure committee the government's net liability for South Canterbury Finance was $300 million to $400 million after fees.

Despite the shortfall Downey said South Canterbury Finance was back in business lending again. It had resumed lending to the consumer market, mainly for small ticket items where the average loan size was less than $10,000, as well as to selected existing customers in the car dealing industry.

"Consumer lending has always been a big part of South Canterbury's business."

Downey said he had budgeted to lend out $1.5 million a week or around $6 million a month, although it was proving to be a slower start than expected.

"The take-up has been less than we expected because South Canterbury was out of the market pre-receivership because the focus was on gathering in cash to recapitalise the business and fund debenture payouts."

Downey said the decision to keep lending had been made to help the business continue as a going concern.

"We have a branch structure with employees - it will enhance the ability to sell."

The Government paid out $1.775 billion when South Canterbury Finance collapsed to depositors and prior ranking creditors.

Yesterday's report did not give any estimates of how much the receivers hope to pay back to the Crown through asset sales.

Downey said they did not expect to include any estimations in the next report either as the information could be commercially sensitive and would be given only to the Crown. The next report is due between the end of February and early May.

In recent weeks Downey has appointed Deutsche Bank NZ to advise on the sale of the "good bank" part of South Canterbury Finance and Goldman Sachs & Partners to sell its investments in Helicopters (NZ) and Scales Corporation.

Downey said the receivers were also looking to appoint banking advisers to the sale of the 34 per cent stake in Dairy Holdings.

The "bad bank" assets were also being advised on by Deutsche Bank.

Downey said he hoped not to have to write off any loans.

The receivers' report gives a breakdown of South Canterbury's loans with the largest proportion of advances to businesses at $690.8 million, followed by property at $256.2 million and the rural sector at $179.6 million.

A total of $1.22 billion had been lent to external parties at August 31.

Downey said South Canterbury Finance's largest loans were to related parties and in the property sector.