South Canterbury Finance is exploring fund raising options with a “degree of urgency” as its balance sheet suffers further asset writedowns.New chief executive Sandy Maier yesterday admitted further writedowns on impaired assets would lead to
South Canterbury Finance is exploring fund raising options with a “degree of urgency” as its balance sheet suffers further asset writedowns.
New chief executive Sandy Maier yesterday admitted further writedowns on impaired assets would lead to a first half loss when it reports at the end of the month.
“Economic conditions have progressed on six months and we’ve learned more about certain situations and it’s likely we will have to take more [provisions] largely in property,” he told NBR yesterday..
“Right now the auditors are going through that. That will come to pass – we will agree with them in the coming weeks and there will be a number.”
The interim result will also be hit by one-off costs associated with the early redemption of derivative instruments on the company’s $US100 million private placement facility and the impact of fair value adjustments on investments.
It now appears that certain items in the June 2009 audited accounts might need to be restated, including the valuation used for a preference share investment in South Island Farm Holdings (SIFH).
South Canterbury in July purchased $64 million of preference shares in SIFH, a company formed in March by Hubbard and owner of 20 dairy farms.
However, Mr Maier said the extent of these adjustments might not have a material affect on the company.
“Obviously our books and prospectus has been subjected to a great deal of checking and rechecking and we just need to clean that up.”
But the expected provisioning and half year loss has added a sense of urgency to South Canterbury’s recapitalisation as it becomes clear that the balance sheet needs replenishing, especially so given its desire to join the government’s extended retail deposit guarantee scheme.
Forsyth Barr has now been mandated to seek funding directly for South Canterbury Finance. Previously the Dunedin-based firm had been working on raising capital for Allan Hubbard’s Southbury Group, to then inject cash into South Canterbury.
Mr Maier told NBR that short-term money was now needed for the finance company in light of the further losses.
“There are a wide range of possibilities. We’ve been approached on many different fronts to sell things, accept new money and we’ve got to sort through that with a sense of urgency and deliberateness.
“As soon as I know you’ll know.”
Mr Hubbard has already been forced to inject funds and underwrite bad loans after South Canterbury posted a net loss of $69 million in the year to June 2009. Southbury Corporation recently completed a $27.5 million private placement to inject capital into South Canterbury.
George Kerr’s Torchlight Credit Fund has also provided $75 million from a syndicate of professional investors from Australia and New Zealand.
South Canterbury has already used the funds to repay $US50 million of principal to institutions invested in notes issued pursuant to a $US100 million private placement.
South Canterbury has undertaken a series of steps to restore liquidity, investor confidence and appease its credit rating agency Standard & Poors.
The company recently changed its auditors and Lachie McLeod stepped down as chief executive before Christmas.
