Gvot moves to protect economy from SCF collapse

There will be no fire sale of South Canterbury Finance's (SCF) assets and businesses won't have their credit cut off, Finance Minister Bill English says.

The comment came as he gave assurances the Government was doing its best to protect the economy from the Timaru-based company's collapse. 

After handing over $1.6 billion to pay out SCF's 35,000 investors under the Retail Deposit Guarantee Scheme, and a $175 million loan so SCF can meet its immediate debts, the Government effectively controls the company.

"The legal owner is the receiver. We happen to be a close adviser," Mr English told reporters.

"We are arranging an orderly receivership which helps us minimise the cost to the taxpayer and minimises the disruption to the economy.

"We are not going to see a fire sale of assets or a meltdown of the loans, or businesses suddenly cut off from credit. That scenario is not going to happen."

Mr English said businesses owing money to FSC, or owned by it, could continue to operate.

The stricken company, holding about $1.6 billion in deposits and running out of cash, went into receivership today after desperate attempts to find new backers failed.

Mr English said the Government expected to claw back most of the $1.6b as the company was wound up, leaving it with a shortfall of about $600 million which would be met from the $900m allocated to the Retail Deposit Guarantee Scheme.

Before the SCF bailout it had paid out about $250m from the fund to cover other collapsed companies, meaning it will be left with only about $50m.

Mr English did not think that was a problem.

"Most of the finance companies that could go under have gone under," he said.

The Government made the immediate $1.6b payment so depositors could be quickly paid out, and to avoid having to pay future interest on deposits.

By doing so it saved about $100m, Mr English said.

SCF's investors have been vocal critics of the way the Government has handled the crisis and there have been complaints about the way the company's founder, Alan Hubbard, has been treated over investigations of other companies he owns.

Mr English indicated he didn't want to hear any more from them.

"I think they should acknowledge that taxpayers across New Zealand are putting their hands in their pockets to the tune of $600m to honour a promise made with a business that's actually gone broke," he said.

"There's been some people saying they won't vote National, but that's not the point and this isn't political.

"There's a lot of other things we could have used that $600m for and I would hope the depositors and the people who are supporting the company are grateful."

In other developments today:

• Mr Hubbard -- who won't get anything from the bailout -- said he could have saved the company if he hadn't been removed from the board in March.

"It has been deeply frustrating and hurtful, over the last nine months, to have been sidelined by my fellow SCF directors and subsequently strait-jacketed by the government regulators, from working to save South Canterbury," he said.

"I have always attempted to place investors' returns first and my personal financial interests second."

• The company's chief executive, Sandy Maier, said SCF's business hadn't "disappeared in a puff of smoke".

People and businesses with loans would continue to work them off in the usual way and there were three subsidiaries in good shape - Helicopters NZ, Scales Corporation and Dairy Holdings.

• Labour's finance spokesman, David Cunliffe, posed questions he said the Government had to answer: "Were there indications of significant difficulties or mismanagement before the original guarantee was made or extended in April this year, and how serious were those problems? What advice to the Government was provided by directors and trustees?"