South Canterbury Finance Audited Half-Year Results

South Canterbury Finance Audited Half-Year Results And
Registration Of New Prospectus

South Canterbury Finance has today registered a new prospectus offering investors and depositors a range of attractive rates and maturities reflecting the Company’s acceptance into the Crown’s Extended Retail Deposit Guarantee Scheme. The prospectus contains the audited financial statements for the Charging Group (comprising South Canterbury Finance Limited and its guaranteeing subsidiaries in terms of its Trust Deed) for the six months ended 31 December 2009.

Registration of the prospectus will be followed by a series of presentations around the country to assist existing and intended investors understand the implications of the extended Crown guarantee and provide an opportunity to meet the new management team.

South Canterbury Finance chairman Allan Hubbard says investors, the finance sector and the Government will benefit from the transition to an orderly market facilitated by the extended Crown guarantee.

“The silver lining from the global financial crisis will be a soundly based finance sector with integrity that supports economic growth and delivers reliable returns for investors from a competitive range of products. South Canterbury Finance has consistently done that for more than 85 years and I am confident that it will continue to do so.”

The Company also confirmed that its Half-year Report for the six months to 31 December 2009 was provided to NZX on 9 April 2010. The Half-year Report and new prospectus are both available at www.scf.co.nz.

As previously announced with the Company’s preliminary result on 1 March 2010, the new management team and Board have undertaken a rigorous review of the Company’s loan book and investments and, working with the Company’s new auditors, Ernst & Young, have determined the final audited result for the half year.

The Company has recognised impairment expenses and increased provisions totaling $209.4 million in the half year. As a result, the Charging Group has incurred an audited net loss after tax of $198.6 million for the half year. This compares to the previously announced preliminary unaudited loss for the period of $154.9 million.

Total equity in South Canterbury Finance is now $206.6 million, comprising $158.9 million of new capital subscribed in January and February and existing equity of $47.7 million as at 31 December 2009. The expected capital contribution announced by the Company on 31 March 2010 resulting from Torchlight Fund’s proposed subscription for convertible notes in Southbury Corporation Limited will further enhance South Canterbury Finance’s equity by at least $22 million.

As a consequence of the increased provision for losses on impaired or non-performing assets and the write-down in the values of certain assets of the Charging Group, South Canterbury Finance would have been in breach of a financial covenant in its Trust Deed, specifically the risk weighted average ratio covenant in clause 16.1(c), on completion of the audited financial statements for the Charging Group. The Trustee has granted South Canterbury Finance a waiver from a breach of this covenant for the period from 31 March 2010 to 31 May 2010.
The expected capital injection involving Torchlight Fund will provide South Canterbury Finance with sufficient additional equity to bring the Company into compliance with clause 16.1(c). Accordingly, the Company is confident that it will comply with clause 16.1(c) by 31 May 2010.
South Canterbury Finance Chief Executive Officer Sandy Maier is pleased to have the new prospectus registered and the results for the six months to 31 December 2009 announced and behind the Company.

"The half-year results bring to account a wide range of impairment provisions on largely discontinued activities in the Company's loan book. The underlying performance for the half year, after allowing for substantial restructuring and other non-recurring changes which impacted the Company's performance, was close to a breakeven result which is relevant to any assessment of our future position."

"Taking the impact of those matters into account, and the Company's inclusion in the Crown's Extended Retail Deposit Guarantee Scheme announced on 1 April 2010, the Company can now look forward to regaining a leading position in the non-bank financial sector by extending finance to a broad range of sectors throughout the real economy. Indicators are showing a pick-up in economic activity and the demand for credit is good."

ENDS

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