Credit Rating Countdown and Poll

Most likely the next news about South Canterbury Finance will be the resolution of the CreditWatch, which is likely to result in another downgrade, although there is also a chance its present BB+ rating, with negative outlook, will be affirmed. Since I have already had my say on SCF's credit rating (see South Canterbury Finance Credit Rating Timeline, and What Credit Rating for a Financial Institution that ran out of Cash Last Week)
I now open the floor for readers to vote on my poll, and to add any comments about the matter.

South Canterbury Finance CEO Lachie McLeod 'required to take risks that were not appropriate'

With the news yesterday that South Canterbury Finance CEO Lachie McLeod has resigned, today some comments are emerging about the reasons why he's leaving, but also some of the factors that contributed to SCF's agressive expansion strategy under his leadership that have lead to heavy losses and a change of strategy toward retrenchment today.

Chris Lee, a Kapiti Coast based financial adviser who had put client funds into SCF, is quoted as saying:

Free Market Mojo interviews Professor Steven G. Horwitz on banking, financial crisis

Free Market Mojo is proud to present an interview with Professor Steven G. Horwitz, the Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY.

He discusses the financial crisis, and also monetary reform. Like myself, Professor Steven Horwitz is a free banker and supports the restoration of the gold coin standard.

See http://freemarketmojo.wordpress.com/2009/11/03/an-interview-with-steven-g-horwitz/

Updated: What Credit Rating for a Financial Institution tht ran out of Cash?

I have updated the post:
What Credit Rating for a Financial Institution that ran out of Cash Last Week?
It now includes a full analysis and discussion of S&P's statements and the issues they identified and how SCF has resolved, or failed to resolve them. Of the 9 issues identified, SCF appears to fail 5, pass or possibly pass 3 and have one unclear result.

South Canterbury Finance: New Losses Reported

See also Seven Ugly Gaunt Cows That Could Swallow South Canterbury Finance

In the last week some more stories have been reported in the news media where South Canterbury Finance, who in its 20th October 2009 registered prospectus, stated that it had not made any lending loss provisions since 30 June 2009 (p 5), has placed borrowers into receivership.

Any more losses will put SCF in breach of its capital adequacy requirements in its trust deed (see p 23 of the prospectus), unless the company can book profits from other sources to offset the losses. The lack of provisioning calls into question whether the accounts of SCF, after 30 June 2009, are true and fair, and whether SCF is engaging in accounting trickery to avoid breaching its trust deed and to keep the trustee off its back.

Seven Ugly Gaunt Cows That Could Swallow South Canterbury Finance

See also:

Fonterra Payout Increase Buys Time for South Canterbury Finance

Share Market to South Canterbury Finance: Not Interested!

Pharaoh said to Joseph, “In my dream I was standing on the bank of the Nile, when out of the river there came up seven cows, fat and sleek, and they grazed among the reeds. After them, seven other cows came up—scrawny and very ugly and lean. I had never seen such ugly cows in all the land of Egypt. The lean, ugly cows ate up the seven fat cows that came up first. But even after they ate them, no one could tell that they had done so; they looked just as ugly as before. Then I woke up." ...
Then Joseph said to Pharaoh, “The seven good cows are seven years ... The seven lean, ugly cows that came up afterward are seven years ... Seven years of great abundance are coming throughout the land of Egypt, but seven years of famine will follow them. Then all the abundance in Egypt will be forgotten, and the famine will ravage the land. The abundance in the land will not be remembered, because the famine that follows it will be so severe. (Genesis 41, NIV)

The good times in an industry don't last forever, and South Canterbury Finance would do well, or would have done well, to hear and heed the dream of Pharaoh, and not stake its survival on the fortunes of fat dairy cows.

A bad omen for South Canterbury Finance IPO

See also: Sharemarket to South Canterbury Finance: Not interested! and
Hubbard flags modest capital raising for South Canterbury Finance




From The IPO window shuts, by DAVID HARGREAVES - BusinessDay

... It's my view that a hell of a lot of, particularly private equity-owned businesses, were being targeted for sale in the first half of next year. A big motivation for this will have been the fact that many struggling businesses face renewing their banking facilities from June 2010 onward.

The logic flows that if the private equity people could flick businesses on for nice profits in the first half of next year they could then look at buying some seriously distressed assets in the second half.

But if they can't of course offload their businesses in the first six months of the year, all of that falls down. And the distressed businesses don't have many ready buyers.

From were I'm standing 2010 is not looking anything like as bright as many people are expecting.

Most of what the article covers appears to include South Canterbury Finance, including:

1. distress
2. planned early 2010 IPO/float
3. Debt terms changing in second half of 2010 (Oct 2010 crown guarantee expiry)
4. No growth opportunity left, they're in retrenchment mode
5. Significant risk of underperformance and lack of appetite for the shares, i.e. the IPO door could slam shut in SCF's face.