English cancels trip as Hubbard decision looms

The woes continue for South Canterbury Finance. Photo / Sarah Ivey

Finance Minister Bill English cancelled an overseas trip and Prime Minister John Key last night refused to rule out an injection of taxpayer funds as the Government grappled with the fate of Allan Hubbard's South Canterbury Finance.

Chief executive Sandy Maier said the way forward for the $2 billion Timaru-based finance company would be revealed this morning, as Mr Key refused to rule out an injection of taxpayer funds.

The company has until the end of today to come up with a plan to secure enough cash to ensure its survival or it faces receivership.

That would trigger a $1.55 billion call on the Government's retail deposit guarantee scheme to repay about 20,000 investors, with eventual losses once the company's assets were realised likely to be around $600 million, Mr Key said yesterday.

Last night Mr Maier, an experienced corporate troubleshooter, said he was 100 per cent sure he would make an announcement this morning.

Mr Maier has been working on proposals from three potential new investors. Yet another extension of the breathing room granted by the company's trustee was "not on my agenda", he said.

Mr English has cancelled a trip to Southeast Asia to be on hand to deal with any potential complications.

Mr Maier yesterday dismissed speculation of a potential bailout of the company involving private sector investors working with the Government as "crazy schemes", but Mr Key would not rule out a plan involving a contribution from the Government.

"I can't and won't do that because it's not useful for me to speculate. What I can say is we've thought very carefully through our actions, we're very deliberate in what we are proposing we may or may not do if required."

Speculation has centred on the possibility the Government may purchase South Canterbury's "bad bank" - a grouping of its poorer-performing assets and loans estimated to have a face value of about $600 million.

Mr Key indicated the retail deposit scheme was sufficiently flexible that it could be used to do just that.

Mr Maier confirmed the scheme was not limited to simply paying out investors following receivership.

One of South Canterbury's key challenges was a large amount of investor funds due for repayment before the end of October when the original guarantee expires, he said.

The implications of that and how to address it would be part of the structure of any deal involving new investors, the chief executive said.

Mr Maier has so far refused to identify the potential investors but it has been suggested they include Sydney-based Duncan Saville, a major shareholder in New Zealand's Infratil, as well as Australian credit fund Sheerwater and South Island businessman George Kerr, who has already invested in South Canterbury.

Meanwhile, support for Mr Hubbard, 82, remains strong in Timaru despite questions over the way he ran his businesses and many in the town are highly critical of the authorities who are investigating his affairs.

Farmer Brian Beattie, 75, has a "good sum" tied up in South Canterbury Finance, but was more concerned with how Mr Hubbard is bearing up.

"I feel for him and his wife. At their age, they don't need all this.

"[Mr Hubbard] is a real gentleman. He's probably too kind. But he's been very good for South Canterbury."

Mr Beattie said Mr Hubbard was among the first to donate money for a museum he was building and "put us on track".

"On that basis, I don't care if I get my money back. It's just the way he did it. It meant a lot to me."

Federated Farmers South Canterbury, which represents a sector heavily involved with Mr Hubbard's companies, sees him quite differently from the head of other troubled financial institutions.

President William Rolleston said: "[Mr Hubbard] has made a commitment, and is following up that commitment, to do everything in his power to make sure people won't be let down."