More than half the $500 million in distressed loans in South Canterbury Finance's new "bad bank" division may be purchased by two buyers, whittled down from a list of 14 possibles.
Overseas interests were included on the list.
Apart from equity-raising earlier this month of more than $1 billion, South Canterbury Finance has been "scrubbing its books", and is placing its assets into three new divisions to get itself back on track.
The divisions are good bank, bad bank and private equity investments.
Barely 24 days ago, South Canterbury Finance may have gone into receivership had it not obtained an extension to the Government's deposit guarantee scheme.
"Of about $500 million owed, we are getting about $1 million a week.
"We face the problem of [maintaining] liquidity and capital.
"We do pay a big price to raise money ... used to pay debentures and bonds".
"We have got to liquidate what doesn't fit.
"It [bad bank] has to be managed for an exit," he said of the loans, which were made outside South Canterbury Finance's usual lending base.
Mr Maier and chief financial officer David Jarman were in Dunedin this week as part of a four-day roadshow of main centres throughout the country "to get out into the community", where they were talking directly to some of the 500 financial advisers and stockbrokers the company deals with.
By the end of this week, Mr Maier expected $200 million of "new" refinancing for the firm, after three months of property sales.
Property investment was South Canterbury Finance's problem, Mr Maier said.
The company had moved too far from its traditional rural/farm-base lending, ending up with more than 30%, or about 3000 loans, worth $477 million in property.
"South Canterbury is a complex beast, with a lot of arms and legs," Mr Maier said.
When asked about the mortgage ranking, where more than 37% of the loans were not on first mortgage basis, Mr Maier said he had not broken down the lending tiers.
"If we've got assets that don't fit they must be merged [into one of the three divisions] for sale," he said.
As an example of property lending gone bad, he cited mezzanine-type funding arrangements, such as $10 million for a property development where no interest was paid.
Instead, the initial $10 million accrued the interest.
"Property investment was [a] graveyard for a lot of people; a boom-and-bust industry which absorbs capital for a long time.
"It was not a traditional activity for us," he said.
Mr Maier declined to talk about specific property loans, deeming it unfair on those borrowers.
However, the proposed $50 million redevelopment of Dunedin's chief post office into a Hilton-managed hotel is one example of property lending gone wrong.
That development, prompting a mortgagee sale, left South Canterbury Finance holding claims for $7.5 million in loans and penalties, after the demise of the developer McEwan Group and the bankruptcy of Dan McEwan.
Two weeks ago, the company recognised impairment expenses and increased provisions totalling $209.4 million in its half-year (to December) result.
That prompted an audited after-tax loss of $198.6 million for the half-year, a 28.2% increase on a preliminary unaudited loss of $154.9 million announced for the period in early March.
Mr Maier said it would take one to three years to sell the bad bank assets.
He declined to say what percentage of the distressed loans was expected to be lost, but given recent negotiations with bidders he said they were factoring in a margin of "10%, 20% or up to 30%" to purchase the loans.
"There are rumours we are selling the family jewels, but this is a business model.
"We have not hit the panic button," he saidHaving announced its bad bank division, Mr Maier took a swipe at big banks, in that they too would have "bad bank" loan books.
Their books would be larger than South Canterbury Finance's, but would not receive the scrutiny South Canterbury Finance was getting.
Mr Maier rejected the suggestion he was appointed by Treasury to oversee the company restructuring.
He took the job after initially being asked to act as interim chief executive.
Mr Maier (58) has specialised in company restructuring for the past 25 years.
He is described as a "high-profile corporate fix-it man".
He was appointed chief executive of South Canterbury Finance in late December.
Since then he says he has been working days of 18-20 hours, seven days a week on the restructuring, expecting staff also to burn the midnight oil to achieve deadlines.
Temporary staff, between 10 and 20 at different times, including receivers and accountants, had been hired for their specialist work, as well as about 100 full-time South Canterbury staff.
"I've got a 2am fan club.
"No-one is allowed to give up; the job has got to be done," he said of meeting ongoing regulatory deadlines.
"There have been a lot of changes, in a big hurry; but that's all got to be done with a modicum of coherence," he said.
He said other than reporting to Treasury, which is required for any finance company in the Government guarantee scheme, there were no further special reports required.
However, being in the scheme required South Canterbury Finance to talk with Treasury on the "parameters" it must work within.
Mr Maier had, in the course of restructuring, been talking to the Takeovers Panel, Securities Commission and New Zealand Stock Exchange on regulatory matters.
Mr Maier said South Canterbury Finance's newly appointed directors, Bill Baylis, Stuart McLauchlan and Denham Shale, were all contributing to the restructuring "on a daily basis".
He declined to reveal his salary, saying he had no equity stake or options in South Canterbury Finance, but his final level of remuneration was linked to the success, or not, of the company.
In the next seven months South Canterbury Finance has up to $1.1 billion to pay back to debenture and bond holders, with the company hoping at least 50%-55%, in line with traditional patterns, will be rolled over by investment holders.
A total $491 million is due by June and a further $640 million by October.
Similarly, Mr Maier is hoping for "at least" a 55% uptake from the company's recent prospectus, which is offering $1.2 billion in registered debenture stock and $50 million of unsecured deposits.
The $1.2 billion debenture stock is covered by the Government's guarantee scheme, the $50 million unsecured deposits are not.
On the problems faced so far, Mr Maier said there had been much "house on fire, get water" activity, but he believed some of the company's initial problems had been solved by extending the guarantee, new governance and capital-raising.
He was "becoming a lot more confident and comfortable" South Canterbury Finance could survive.
The private equity investment division includes holding shares in Helicopters (NZ) and Scales Corp, and previous loans associated with chairman Allan Hubbard's business interests.
Mr Maier said while those assets were "not a fit [alongside core assets] and had a natural place elsewhere", they were not going on the market.
They would remain in place as the core finance company "was driven in another direction".
The loans were not destined to be written off.
However, some could be written down and otherwise "segregated", Mr Maier said.
South Canterbury Finance's next prospectus was due out by September.
The company had not decided how much to seek, but it could be as much as $1.2 billion again, Mr Maier said.
The company could focus upon offering a larger percentage of the equity-raising to the public outside the Government guarantee scheme.
The guarantee expires in October next year.
Mr Maier formerly indicated he wanted the company "weaned off" the scheme, to again stand on its own and not be considered a "ward of the state".
To observers, amid intense scrutiny, it would appear South Canterbury Finance has squeaked through its troubles on several "11th-hour" fronts.
It only just maintained its crucial Standard & Poors rating, paid down its $US100 million loan and $US20.9 million settlement fee, gained an extension to the Government guarantee in the face of possible receivership and relaunched its prospectus on time.
Had it not delivered the prospectus on time, all trading in its securities could have been suspended.
Delivering its next prospectus, by September, will likely be one of the company's toughest hurdles.
The question is whether investors have the appetite and confidence to reinvest with South Canterbury Finance outside any Government guarantee, which will again raise the prospect of a squeeze on the liquidity of the country's largest finance firm.
Three divisions
> Gook bank: To eventually hold about $1 billion, on secure loans which would be repaid.
> Bad bank: Holding about $500 million of distressed loans (about 95% in property), with $272 million which could be sold shortly. Up to three years to exit completely.
> Private Equity/Investments: Holding up to $400 million in loans, including shares in Scales Corporations and Helicopters (NZ).
