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Doubts expressed about SCF as SFO continues investigation

Fuseworks Media
Fuseworks Media

Wellington, Aug 30 NZPA - South Canterbury Finance is warning "there can be no certainty" recapitalisation and restructuring proposals will be successfully implemented, while the Serious Fraud Office says it will continue investigating related companies operated by Timaru businessman Allan Hubbard.

In an announcement to the NZX today, as speculation about SCF's future reaches fever pitch, SCF said it was still in discussions with interested parties to try to put together a recapitalisation and restructuring solution acceptable to all stakeholders.

SCF said it expected to be in a position to make an announcement to the market tomorrow.

SCF owes 20,000 investors about $1.7 billion, and is believed to be running out of cash to pay investors and meet statutory requirements.

It needs a new backer or a cash injection from the Government to avoid receivership.

The $1.7b debentures are covered by the government retail deposit guarantee scheme which means those investors would be paid out by the Government if South Canterbury failed.

SCF chief executive Sandy Maier is playing down speculation the beleaguered company is looking for a taxpayer funded rescue plan.

"It's a very long stretch to say ... that represents some kind of capital contribution or bail out or whatever, or that we're negotiating with Treasury for cash contributions or so on," Mr Maier told Radio New Zealand.

"At present there isn't anything like that going on. The only live discussion at the moment is with private sector parties, and taking cognisance of the (retail deposit) guarantee."

SCF president for life, and chairman until March, Alan Hubbard said there was a deal on the table to help the firm but it would need government money too.

Prime Minister John Key this morning assured anyone with debentures in the ailing company that their money was safe.

The Government had provisioned $900 million as a potential loss to the finance company sector and South Canterbury had some assets.

"No one can argue the taxpayer hasn't stepped up," Mr Key said.

The Government also wanted to minimise any loss incurred by the Crown, he said.

Two of Mr Hubbard's other companies, Hubbard Management Funds (HMF) and Aorangi Securities, seven charitable trusts, Mr Hubbard himself and his wife Jean have been put under statutory management.

About 300 investors in HMF have been told the company overstated its value by at least 25 percent on March 31, reporting non-existent investments and cash balances.

Mr Hubbard disputes the figures.

Stand By Hubbard Support Team spokesman Paul Carruthers accused Mr Key of wrongly implying that SCF's position was not linked to the action the Government had taken against Mr Hubbard's other entities.

Despite the Government's assurances at the time statutory management was imposed that SCF was exempt from these measures, and therefore not necessarily at risk, the inextricable link between Allan Hubbard and SCF was shown by the "almost immediate downgrading of SCF by Standard and Poor's, and the downward spiral SCF has been in ever since", Mr Carruthers said.

The SFO today said its investigations would continue following consideration of a preliminary investigation report into the affairs of Aorangi.

"This investigation was commenced because the SFO, after very careful consideration of the information received from the Registrar of Companies, believed offences involving serious or complex fraud may have been committed. With the additional information acquired since then, I consider that it is appropriate to further our inquiries," SFO chief executive Adam Feeley said.

Recent reports by the statutory managers had highlighted the range of issues which were emerging in the inquiries into Aorangi and HMF, he said.

"This is a major investigation into a very complex range of issues. It would be foolish to think that some investor interviews and a cursory examination of the documentation would do justice to the issues that have been raised."

Mr Feeley said while the SFO's initial inquiries focused primarily on Aorangi, there was a considerable overlap between investments in ASL and HMF, so its further inquiries would be considering both related entities.

The SFO still had to do several interviews along with considerable financial analysis before a further report would be completed.

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