The Herald reports:
South Canterbury Finance Limited announced today that it has been unable to complete a recapitalisation and restructure.
As a result, the Company would have been unable to certify to Trustees Executors Limited, in accordance with the terms of its debenture trust deed with Trustees Executors Limited, that it was compliant with various financial covenants under the debenture trust deed for the financial year ended 30 June 2010.
Accordingly, South Canterbury Finance Limited has requested Trustees Executors Limited to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so.
This is not the end of the road – it means TEL now has control of SCF. However it strongly indicates that the Government’s guarantee of deposits will be called on.
Personally I am pleased the Government didn’t attempt a King Canute.
Bernard Hickey writes:
The government’s decision not to support a recapitalisation plan for South Canterbury Finance was the right one. Receivership was the cleanest, simplest and ultimately safest option for both taxpayers and investors.
The government will now have to pay out around NZ$1.6 billion to 35,000 depositers in South Canterbury Finance that were covered under the extended guarantee scheme.
They have already paid out today $1.7 billion. Ouch. However some of that will be recovered over time.
It was clear from Prime Minister John Key’s comments yesterday about the administrative and institutional mess inherited by CEO Sandy Maier that he was no fan of the way Allan Hubbard had created and run the business as part of his own charitable small business empire.
Hubbard was making no interest ‘helping hand’ loans to young farmers and then mortgaging his own assets to make the interest payments.
Which is well intentioned. But he lent too much bad money, and in the end he has left the taxpayer with the bill. That is not generosity. Allan Hubbard is not the victim here – the taxpayer is.