South Canterbury Finance preference shares have hit a record low, valued at 9c (down from their $1 issue), as the expiry deadline of a trustee waiver looms on August 31.
The value of preference shares, which raised $100 million four years ago for South Canterbury, is considered to mirror investor sentiment regarding a company's welfare.
South Canterbury have maintained all along, as preference share values declined in recent months, that the company had never missed a payment of principal or interest and its wide-ranging restructuring would eventually restore value to the preference shares.
After the surprise announcement of founder Allan Hubbard being placed under statutory management by the Government, and the Serious Fraud Office launching a probe on June 20, the 24c preference shares gradually slipped to yesterday's low.
South Canterbury is not under statutory management and its depositors remain covered by the Crown's extended deposit guarantee scheme.
Craigs Investment Partner broker Peter McIntyre said the weeks ahead for South Canterbury were "critical", as it approached the expiry date of its trustees waiver.
"Either South Canterbury gets the new equity [partner] funding required to cover itself or another waiver extension, or worst case, the trustees won't let South Canterbury register a new prospectus," he said.
South Canterbury announced in early June it hoped to get a new equity partner on board, with industry speculation it was seeking between $200 million and $400 million, but there has been no update.
The trustee conditions say South Canterbury "will seek to comply with this covenant by, if necessary, selling equity securities held by it, or raising additional capital".
The trustee waiver was sparked by a proposed, separate, equity injection by South Island businessman George Kerr's Torchlight fund up to $37.5 million, but at May 31 the Crown consent for the transaction, under South Canterbury's Crown deposit guarantee, had not been obtained.
Had the Torchlight funds been available it would have shored up the trustee's requirement of South Canterbury maintaining a "risk-weighted asset covenant", which must not exceed 100% of the book value of equity securities held compared to shareholders' funds.
Significantly, South Canterbury's asset covenant stood at 136% in late February this year.
The trustees subsequently issued a conditional waiver, then extended it until August 31, allowing South Canterbury to trade while being outside the risk-weighted covenant; as per trustee deed.
