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