SCF assets value could diminish

The value of some of failed South Canterbury Finance's assets may be downgraded as a result of last week's devastating earthquake in Christchurch.

Reports and announcements are due out from statutory manager Grant Thornton, the Serious Fraud Office and receiver McGrathNicol.

From supplying monthly reports, Christchurch-based statutory manager Grant Thornton was moving to three-monthly reports.

The latest is overdue but likely to be released early next week, according to a spokesman.

Scales Corp is 79.7% owned by South Canterbury Finance (SCF) and is for sale.

After Tuesday's quake the Scales House in Montreal St, Christchurch was evacuated, and its future is yet to be determined.

Christchurch staff of both Grant Thornton and McGrathNicol, working respectively on statutory management and company sales through receivership, have been moved from offices in the now cordoned-off Christchurch CBD.

Craigs Investment Partners broker Peter McIntyre said a revaluation of Scales House would be required, but many of the stable of businesses under the wide-ranging SCF banner were outside Christchurch and would maintain values, albeit in a "difficult economic environment".

He said the sale of NZ Dairy Holdings should realise good value for the receivers, given strong global commodity prices and the recently boosted Fonterra forecast payout.

Similarly, assets of Hubbard Managed Funds included some equities which may have improved in value since the receivership.

However, while companies such as Helicopters New Zealand, Scales and Face Finance were all "reasonable" businesses in their own right, the timing of their proposed sales this year could pose difficulties in getting a "reasonable price".

"They [the receivers] will more than likely find themselves being in a position of being price takers, as opposed to price makers," he cautioned.

In a shock announcement in June last year, the Government seized control of the affairs of millionaire South Island financier Allan Hubbard when then Commerce Minister Simon Power ordered Aorangi Securities, seven associated charitable trusts, Mr Hubbard and his wife, Margaret, to be placed into statutory management under the control of accountancy firm Grant Thornton. The Serious Fraud Office is investigating the affairs of Aorangi Securities Ltd for potential breaches of the Crimes Act. SCF collapsed on August 31 and was placed in the hands of receivers after failing to recapitalise itself, triggering the Government to inject $1.775 billion to repay 35,000 investors and creditors under the emergency Crown retail deposit guarantee scheme.

In mid-October the Serious Fraud Office launched an investigation into related-party transactions of SCF which may not have been disclosed to the Government. The focus was on five loans worth tens of millions of dollars. At the centre of the investigation is whether disclosure of the loans could have made SCF ineligible for inclusion in the Government's retail deposit guarantee scheme.

The Government's $1.775 billion payout was the largest by far of eight payments made under its emergency retail deposit guarantee scheme.

The $1.775 billion included a loan of $175 million to the receivers to pay first-ranked creditors, making the Government the main creditor. At the time of the announcement, it was estimated the sale of SCF's assets could realise $1.1 billion for the Government, but leave taxpayers out of pocket by up to $600 million.

Pending

• Statutory manager Grant Thornton is due early next week to release an overdue sixth report on Allan Hubbard's Aorangi Securities and Hubbard Managed Funds.

• The Serious Fraud Office is due within weeks to announce the outcome of an investigation into Aorangi Securities.

• Receiver McGrathNicol is readying companies for sale, including Scales Corp, NZ Dairy Holdings, Helicopters New Zealand and Face Finance.

 

 

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