'Bad bank' sent another 20 firms to wall

Photo / Sarah Ivey

South Canterbury Finance's "bad bank" was in a desperate last-ditch race for cash, tumbling a string of property and business empires as it entered its death throes.

SCF's receivership pitched at least 20 other companies into receivership as loans and interest slipped into default in the last year.

The financier lost its shirt in upmarket Princes Wharf and Vulcan Lane bars. Companies owning the wharf's ritzy Lenin Bar, Dakota Bar, Minus 5 and the lane's O'Carrolls Irish Bar failed to repay so SCF tipped them into receivership, owed $1,904,128 but paid out just $433,900, according to receivers BDO who kept the bars open and eventually sold them.

"We continued to trade these bars and worked through the process of selling each business as a going concern," BDO said in its receivership report.

Properties in Auckland, Marlborough, Christchurch and Wanaka sucked in much of the SCF cash. Disastrous luxury hotel resort and vineyard lending played a big part in the moves which sparked New Zealand's biggest Government bailout, the financier dragged down after pouring millions into the bars, hotels and rural farms.

Taxpayers now have to pay for SCF's bad lending policies after developers borrowed millions to fund ventures which poisoned SCF's books.

Sandy Maier, SCF chief executive, earlier this year described SCF as having a "good loan book" around $700 million-$1 billion but a "bad loan book" of at least $600 million.

One of SCF's largest exposures was to a Marlborough vineyard venture by Auckland developer Greg Olliver.

Leefield Vineyards (in receivership) owes two lenders $50 million: SCF's $17 million second mortgage and Commonwealth Bank of Australia's $33 million first mortgage, receivers Michael Stiassny and Brendon Gibson said.

SCF's Nelson office was listed as having security over that rural property where Olliver amassed 2165ha, nine houses and assorted farm buildings.

High Court action over Olliver's bankruptcy showed creditors claiming $92.5 million from Olliver's businesses. He said he was paying SCF income from his Marlborough farm to service his debts.

KordaMentha's April update gave a sickeningly low "net cashflow" of $19,238 from Leefield.

But SCF has been unable to quit Auckland's Hyatt Hotel, negotiating with buyers just as the property boom deflated three years ago.

SCF's main tombstones are in the South Island, stretching from Marlborough to Wanaka, where ex-chief executive Lachlie McLeod was prolific with mainly retirees' money on a string of high-risk ventures. McLeod and SCF's chief financial officer left the business last year.

Hotel So, the boutique 283-room high-tech property at 165 Cashel St now advertising rooms from $69 and with rooms of just 11sq m, was a particularly bad bet, SCF desperately trying to recover millions from three companies it loaned to in 2006.

Hotel So was developed by Christchurch-based anti-IRD campaigner Dave Henderson.

Three companies behind Henderson's Hotel So owe SCF $20 million-$30 million. Further funding came from Dominion Finance. SCF appointed receivers to enter the three Henderson companies which own and operate the hotel: Cashel Ventures, Hotel So Operations and Hotel So Corporation. Reports on the hotel's latest valuation, around $9 million, give an indication of the enormity of the losses.

Other lenders, including Hanover and Allied Farmers, have been chasing Henderson's Property Ventures after the collapse of the planned Five Mile town centre at Queenstown.

SCF also loaned to Wanaka's Oakridge Resort, a luxury development on a 25ha site, tipped into receivership by SCF after loan repayment defaults. Liquidators Ashton Wheelans & Hegan estimated a $1,038,996 deficit on April 14, noting how SCF tipped the company over, exercising its powers under its general security agreement.

MONEY TRAIL

Where some of SCF's billions went:

* Lenin Bar, Princes Wharf
* Dakota Bar, wharf
* Minus 5, wharf
* O'Carrolls Irish Bar, Vulcan Lane
* Hyatt Hotel, Auckland
* Leefield Vineyards, Marlborough
* Hotel So, Christchurch
* Oakridge Resort, Wanaka