Otago Daily Times

SCF set to be fi­nally wound up


AUCK­LAND: The husk of South Canterbury Fi­nance, once the coun­try’s largest fi­nance com­pany and New Zealand’s largest cor­po­rate fail­ure, is fi­nally be­ing given its last rites by liq­uida­tors.

Fil­ings to the Com­pa­nies Of­fice by ad­min­is­tra­tors PwC in­di­cated the com­pany, and its par­ent South­bury, would soon be re­moved from the reg­is­ter — more than 10 years af­ter South Canterbury Fi­nance’s (SCF) col­lapse in Au­gust 2010 rep­re­sented the high­wa­ter mark of the Global Fi­nan­cial Cri­sis in New Zealand.

PwC’s fi­nal re­port said its ef­forts had se­cured $9703 for the first­rank­ing deben­ture holder — the Crown — a con­sid­er­ably larger $485 mil­lion re­main­ing out­stand­ing.

Trea­sury was un­able on Mon­day to give a pre­cise cost of the SCF bailout to the Gov­ern­ment as the $485 mil­lion is un­der­stood not to in­clude min­i­mal re­cov­er­ies gov­ern­ment­run ‘‘bad bank’’ Crown As­set Man­age­ment Ltd (CAML) made from work­ing out dis­tressed as­sets.

PwC’s John Fisk said the length of his ten­ure — he took over in 2012 af­ter re­ceivers had spent two years gen­er­at­ing what re­cov­er­ies they could be­fore CAML was set up — was largely down to court ac­tion.

‘‘When you’ve got an en­tity that was the size and com­plex­ity of SCF, there’s al­ways a lot of loose ends that need ty­ing up,’’ he said.

PwC’s re­port said $162,400 was clawed back in void­able trans­ac­tions, and $265,189 was charged in liq­uida­tor’s fees.

The con­clu­sion of the liq­ui­da­tion marks an ig­no­min­ious end for a com­pany founded in 1926, which rose to great heights but be­gan to break apart in 2009 af­ter its owner Alan Hub­bard was placed into statu­tory man­age­ment and un­der Se­ri­ous Fraud Of­fice pros­e­cu­tion.

The Global Fi­nan­cial Cri­sis ex­posed ques­tion­able re­lat­ed­party lend­ing which had been cov­ered up by what a crim­i­nal pros­e­cu­tion later de­ter­mined were lies in ac­counts and prospec­tuses.

The ap­point­ment of re­ceivers McGrathNi­col in Au­gust 2010 trig­gered a $1.7 bil­lion pay­out for in­vestors un­der the Crown re­tail de­posits guar­an­tee scheme — an emer­gency in­sur­ance pol­icy un­veiled by gov­ern­ment to pre­vent a run on de­posits dev­as­tat­ing the en­tire sec­tor — and years of acrimony in Ti­maru, Par­lia­ment and the wider busi­ness com­mu­nity.

The scale of the pay­out — one full per­cent­age point of GDP — rep­re­sented a fail­ure and bailout on par per capita with in­sur­ance gi­ant AIG’s col­lapse in the United States.

Mr Hub­bard, whose par­si­mo­nious life­style — he lived in a mod­est home and drove a decades­old car de­spite be­ing worth $650 mil­lion at his peak — was in fail­ing health and his 80s when the col­lapse came. Prob­lems were ex­ac­er­bated by a busi­ness style later de­scribed by a High Court jus­tice as ‘‘less than ortho­dox’’, re­ly­ing as it did on hand­writ­ten ledgers, hand­shakes and shuf­fling fi­nan­cial deckchairs.

Mr Fisk said the stand­out fea­ture of SCF, com­pared with other failed fi­nance com­pa­nies he had ad­min­is­tered, was ‘‘a lack of records’’.

‘‘When we had to go search­ing for things when lit­i­ga­tion was in­volved, that would be the main dif­fer­ence with the other fi­nance com­pa­nies — you couldn’t find any­thing to sup­port de­ci­sion­mak­ing,’’ he said.

Mr Hub­bard faced a raft of Se­ri­ous Fraud Of­fice charges over his pri­vate in­vest­ment ve­hi­cles, but died in a car crash in 2011 while the SFO was prob­ing SCF. Its owner and chief ex­ec­u­tive was con­sid­ered to be a ‘‘per­son of in­ter­est’’.

Mr Hub­bard’s board­room col­leagues were left to face the SFO mu­sic by them­selves in a 2014 trial that be­came one of the coun­try’s long­est run­ning. The de­fence largely pinned blame on their dead col­league.

In the end only one per­son was found guilty — lawyer Ed Sul­li­van — of four counts of mis­lead­ing in­vestors, most no­tably at­tempt­ing to ob­scure tens of mil­lions of dol­lars in im­paired re­lated­party lend­ing by en­rolling his brother­in­law to di­rect a com­pany Mr Sul­li­van had set up to nom­i­nally own Auck­land’s Hy­att Ho­tel.

While the com­pany it­self will soon be con­signed to history, parts of it con­tinue to live on. Its then­new head­quar­ters were oc­cu­pied for only a few months in 2010 be­fore re­ceivers moved in. The build­ing is now oc­cu­pied by lo­cal news­pa­per The Ti­maru Herald. — The New Zealand Herald

 ?? PHOTO: ODT FILES ?? The of­fices of South Canterbury Fi­nance in Ti­maru at the time of its col­lapse a decade ago.
PHOTO: ODT FILES The of­fices of South Canterbury Fi­nance in Ti­maru at the time of its col­lapse a decade ago.

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