Call to release SCF papers

Allan Hubbard
Allan Hubbard
The Government should release the documents and advice it received on South Canterbury Finance to provide transparency about the deal, Craigs Investment Partners broker Chris Timms said yesterday.

The issue became a hot topic again with Labour finance spokesman David Cunliffe calling for the resignation of Finance Minister Bill English for his handling of the issue.

Treasury figures released on Monday showed a $331 million spike in the cost of the retail deposit guarantee scheme due to the collapse of SCF.

The Government now expected a net loss from the scheme of about $1.2 billion, compared with earlier estimates of about $900 million.

SCF, the company founded by Timaru businessman Alan Hubbard, was put into statutory management and receivership last year.

Prime Minister John Key said in Wellington there were no good offers for SCF.

Treasury on Monday reaffirmed there were no credible offers made.

"If there was a decent bid out there, we'd take it. But the bids were 'we are taking the upside, you wear all the downside, we can't quantify it and, by the way, there's no cash up front, you have to fund the entire transaction'. Well, it doesn't sound like a very good deal," Mr Key said.

Mr Timms said there was one way to silence critics once and for all and that was to release the documents and advice.

"I've never seen what offer there was and whether anyone was bidding."

The Government should make it clear what options were available, given the state of the economy at the time.

No-one could have foreseen the economic impact of the Christchurch earthquakes and with the benefit of hindsight, any downside could have now been limited, he said.

The Government would have wanted to get the best deal for taxpayers and would have priced SCF's assets accordingly.

At the time of the statutory management, the Government probably believed that given the prices offered, it had an opportunity to manage the sale process to get the best prices.

"The Government should be happy to let us know what that process was," Mr Timms said.

Mr Cunliffe told the Otago Daily Times he had seen offer documents that would have limited taxpayer costs for SCF to around $500 million.

"The extra $700 million lost to the taxpayer is in effect roughly the equivalent to all the new money John Key has just cut out of this year's Budget."

Reputable bidders like the New Zealand Superannuation Fund, Ngai Tahu and a major international investment bank were turned away, he said.

Assets were left to rot in receivership and it was no surprise their value collapsed.

Mr Cunliffe had spoken to a "senior receiver" who was deeply worried about the state of the assets.

"Once the assets are in receivership, if they are not sold quickly, workers get laid off, people don't get paid and people lose confidence in the process. These assets have been rotting on the vine for six months.

"I feel sad for the farmers in South Canterbury. It is my home province and I know how it works. If anybody rips anybody else off, everyone knows about it by lunchtime.

"Allan Hubbard is not a saint but he is not a crook either. If he had ripped people off, the whole district would have known years ago," he said.

Mr Key said all bids had required the Government to underwrite losses which would have cost more than the scheme.

"As late as yesterday, we asked Treasury again. No deal we were ever presented came anywhere near being better than what we've actually done," he said.

"The reason we are in this position is Labour signed up to a deposit guarantee scheme, South Canterbury Finance had massive loans, those loans went broke.

"The simple bottom line is, with South Canterbury Finance we inherited a mess.

"There was no-one who wanted to buy it and that's because there was no value there. And the only people who wanted to buy it wanted to put up tiny amounts of cash and have the Government basically insure them for any downside losses."

The Labour government, supported by National, decided to include SCF in the scheme because excluding finance companies but including banks would have been unfair and would have seen more companies go under, Mr Key said.

Then their assets would have been sold into a very poor market.

Questions emailed to Mr English asking whether he had any regrets about not selling off SCF six months ago, and what advice he had received on the value of the assets, did not receive a response.

 

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