State Pays $1.1 Billion as New Zealand's South Canterbury Finance Fails
New Zealand’s government will pay NZ$1.6 billion ($1.1 billion) to bondholders and depositors of failed lender South Canterbury Finance Ltd. in the country’s biggest bailout under its state guarantee program.
Today’s payment to the lender’s trustee falls under a program that guarantees NZ$133 billion in assets, said Angus Barclay, a Treasury spokesman. South Canterbury, which focuses on small businesses and farm financing, joins seven other state- guaranteed institutions that have defaulted since March 2009, the Treasury said.
New Zealand’s currency weakened as the failure of the 84- year-old firm with 13,000 clients sapped demand for the nation’s assets. South Canterbury’s attempts to attract an investor or raise capital before today’s deadline failed and shareholders will be wiped out, Chief Executive Officer Sandy Maier said.
“We really have one funder and that’s the government of New Zealand,” Maier told reporters. “We’ve got more liabilities than assets and we’ve got precious little cash. In the absence of discovering oil on some property of ours, equity holders can’t look forward to any return.”
The New Zealand dollar fell to 70.23 U.S. cents as of 2:01 p.m. in Wellington from 70.71 cents in New York yesterday.
Net Loss
Based in Timaru on the east coast of New Zealand’s South Island, South Canterbury offers a range of financing, from car and boat loans to farm and small-business funding, according to its website. The company’s first loan in March 1926 was for NZ$60 and earned interest of NZ$10 over three years.
After the financial crisis sent New Zealand into recession, the group posted a net loss of NZ$198.6 million in the six months ended Dec. 31 on impairment costs and higher provisions.
Maier had sought to separate the loans most at risk of souring into a so-called bad bank. That unit is home to NZ$700 million of loans, he said today.
Among the other government-guaranteed institutions that have defaulted are Allied Nationwide Finance, Mutual Finance and Viaduct Capital, the Treasury said.
The government expects to recover most of the NZ$1.6 billion paid to the trustee as the receiver sells South Canterbury’s assets, Finance Minister Bill English said in a statement.
South Canterbury’s trustee, Trustee Executors Ltd., appointed Kerryn Downey and William Black of McGrathNicol as receivers, the lender said in a statement.
The trustee has already submitted a claim to the Treasury on behalf of depositors and stockholders, the Treasury said.
“When an up-to-date register of debt security holders is available, the Crown and the trustee will arrange prompt payment to everyone on the register,” the Treasury said in its statement.
To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net
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