South Canty heartened by good investor take-up

Allan Hubbard has bundled South Canterbury Finance, Helicopters NZ and his stake in Scales Corporation into a new holding vehicle, Southbury Corporation. Photo / Supplied

The participation of a leading institutional investor in the $27.5 million capital raising for South Canterbury Finance's new parent is a vote of confidence in the group's future, says chief executive Sandy Maier.

Southbury Corporation, Allan Hubbard's new holding vehicle for his South Canterbury Finance, Helicopters NZ and his 79.7 per cent stake in Scales Corporation, raised the cash through a private placement of convertible notes.

Maier said the cash was effectively equity with Southbury using it to subscribe for new ordinary shares in South Canterbury.

However the notes rank ahead of South Canterbury's retail debentures. The money would be used by the finance company to meet "general cashflow needs" and was raised from a mix of individuals and institutions.

"There was at least one of what I'd call a leading institutional investor which was a good sign. They understood the offer and they understand our situation."

None of the investors, all of them New Zealand based, were related parties.

Southbury said the issue was the first part of a two-stage capital raising process.

"This obviously keeps options open and alive," said Maier.

"There is a lot of debate as to whether the market is ready for an equity raising in the form of an initial public offer. That's one of the further steps that could hang off the back of this but not the only one. The formation of the group is important for that same reason so this keeps open the widest range of public market and private market solutions for us."

Maier said the injection of capital would be encouraging to ratings agency Standard & Poor's which improved its outlook on South Canterbury last year and reaffirmed its BB+ rating. He didn't necessarily expect a response from S&P to yesterday's news.

"Generally this is the kind of move in terms of increased equity that they wanted to see and that they've flagged to us before so that will be good, but whether they'll make a direct response is not that easy, it's over to them."

The placement was arranged by Forsyth Barr and the notes convert into equity in Southbury in the event of an IPO, or are otherwise redeemable for cash.

South Canterbury Finance has provided a guarantee for the redemption of the notes in exchange for an indemnity from Southbury.

In yesterday's announcement, Hubbard said the formation of Southbury and the issue of the notes "are major steps in our restructuring".

"Taken together with the recent appointment of independent board members and group chief executive, resolution of the US private placement noteholder matter, restructuring of group banking arrangements and the recent confirmation of South Canterbury Finance Limited's BB+ credit rating, it means we are well on the way to a totally fresh approach to the future."

HUBBARD'S NEW CORPORATION

* Timaru-based businessman Allan Hubbard (right) has bundled South Canterbury Finance, Helicopters NZ and his stake in Scales Corporation into a new holding vehicle, Southbury Corporation.
* Hubbard says the new structure is a crucial step in the restructuring of his business interests.
* Southbury yesterday announced it had raised $27.5 million in new equity from institutional and private investors.