Govt liability for South Canterbury is $600M: Key

Key says government liability for South Canterbury is about $600M

By Paul McBeth

Aug. 30 (BusinessDesk) – The Crown’s net liability for South Canterbury Finance is about $600 million though the Cabinet is considering other options should the firm fail, Prime Minister John Key says.

“It’s in the ballpark of $600 million” Key told the post-Cabinet media conference. That makes it about two thirds of the $900 million the government has provided for under the guarantee, he said.

Key declined to give details of alternatives such as a government-funded rescue, saying the government will wait for the trustee’s decision tomorrow. That’s when the waiver the SCF’s covenant breach lapses. Still, Finance Minister Bill English has delayed a trip to Asia by at least a day pending the outcome.

Key said the government is comfortable with its ability to come up with the cash because the Debt Management Office has been active in fund raising recently.

SCF chief executive Sandy Maier has been working through a lot of “back-office problems” and it is fair to assume there were the same issues as with Hubbard’s other vehicles though not as bad as at Aorangi Securities.

Separately today, the Serious Fraud Office will continue to probe Allan
Hubbard’s investment vehicles after completing its preliminary report into Aorangi Securities.

Director Adam Feeley said the investigation began because the office believed “serious or complex fraud” may have been committed, and will look at Hubbard Funds Management, which the statutory managers for Hubbard his wife, Jean, has also looked into.

“This is a major investigation into a very complex range of issues,” Feeley said in a statement. “It would be foolish to think that some investor interviews and a cursory examination of the documentation would do justice to the issues that have been raised.”

Statutory managers Richard Simpson and Trevor Thornton, of Grant Thornton, flagged more concerns about Hubbard’s Aorangi Securities and HMF in their second report, issued last week, saying the former was too exposed to the dairy sector and the latter was over-valued by at least 25%.

The government appointed statutory managers over some of Hubbard’s interests on the advice of the Securities Commission after a complaint was made by an investor in Aorangi who claimed not to have been given a prospectus.

Since then, the decision has polarised the investing community, with South Islanders rallying around the man who has propped up much of the region’s economy, while others have bayed for blood in the wake of the finance sector’s collapse several years ago.

(BusinessDesk)

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