South Canterbury debenture halt

South Island businessman Allan Hubbard's South Canterbury Finance has ceased issuing debenture stock to retail investors as it seeks to resolve issues around US$100 million of funding placed in jeopardy by last month's credit rating downgrade.

Standard & Poor's reduced its rating on New Zealand's largest locally owned finance company from BBB- to "sub investment grade" BB+. The downgrade entitled investors in a US$100 million private placement to require repayment at the end of three months.

South Canterbury had held "constructive discussions" with those investors, chief executive Lachie McLeod said yesterday.

That, with the company's ongoing "restructuring and capital raising initiatives", the extension of the Government's retail deposit guarantee and other matters, prompted the company to cease issuing debentures under its current prospectus on August 21, he said.

"Accordingly, all funds received by the company after August 20, 2009, have been placed in trust on behalf of subscribers."

South Canterbury now planned to register a new debenture stock prospectus after it released its audited accounts expected on or before the end of the month.

Market commentator Arthur Lim said the audited accounts would be subject to intense scrutiny with the extent of related party transactions - flagged as a key issue by Standard & Poor's - of particular interest.

South Canterbury also said it was in "advanced discussions with two potential new independent directors" and expected to make an announcement on that and restructuring and capital-raising plans "in coming weeks".

The yield on $125 million of South Canterbury December 2012 listed bonds rose from 18 per cent to 19.5 after the announcement.