PM’s Presser – South Canterbury Finance

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Investors in the foundering lending firm South Canterbury Finance will get paid from the public purse if the company collapses, John Key says.

The Prime Minister told reporters Monday the Government was waiting on an imminent decision by South Canterbury’s directors on whether to go into receivership.

If so, the Government would be liable for the return of debenture holders’ investments – with accrued interest – under the terms of its Retail Deposit Guarantee Scheme.

Key said he was confident the $900m fund would be adequate to cover the company’s 20,000 “Mum-and-Dad investors”, who were owed around $250m in deposits.

The government faced a potential liability of around $600 million including bonds and other securities but Key said he believed asset sales would reduce the net cost.

Key said his Government had supported the scheme’s creation while in Opposition and wanted to minimise the cost to the taxpayer.

But Key added the Government also sought to ensure disruption to the wider economy was kept to a minimum, fuelling speculation of a corporate bailout.

He did not rule out the possibility of a bailout but said he did not think South Canterbury was a case of ‘too big to fail’.

“When people talk about that they’re talking about the impact on depositors and depositors losing their funds.

“That’s just not a situation that’s going to occur here with South Canterbury Finance,” he said.

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