Fisher and Paykel Appliances' finance company has joined four other institutions approved for the Crown's extended retail deposit guarantee scheme. All of them will be covered until the end of next year.
Craigs Investment Partners broker Peter McIntyre said it was crucial at present for the five companies to remain in the extended Crown guarantee scheme so as to be able to attract, or retain, investor confidence during the next 18 months.
"Without the Crown guarantee, the ongoing viability of the finance companies would come into question," he said.
Investors are covered by the Crown for up to a maximum $250,000 under the extended scheme, as opposed to the earlier scheme where cover was up to $1 million per investment.
The companies participating in the extended scheme require a minimum Standard and Poor's credit rating of BB- to be included, a rating which carries a 1-in-10 chance of default probability over five years, as opposed to a AAA rating carrying a 1 in 600 chance of defaulting.
The S&P ratings of BBB+, BBB- and BBB indicate an adequate capacity to pay interest and repay principal.
Although it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal than with debt in higher-rated categories, S&P has said.
The 30-year-old F&P Finance carries a BB, stable outlook S&P rating offering guaranteed and non-guaranteed deposits.
South Canterbury Finance is by far the largest participant in the extended scheme and its 11th-hour inclusion in the scheme staved off the likelihood of receivership, albeit it with a BB, creditwatch negative outlook.
Its inclusion came at a crucial time, in the middle of restructuring and recapitalisation.
South Canterbury is seeking $1.25 billion from investors - $1.2 billion in debenture stock is covered by the extended guarantee and $50 million in unsecured deposits, which is not.
Mr McIntyre said the original guarantee scheme had cost trading banks and finance companies $74 million to be in, for the year ended June 2009, and it was unlikely the trading banks would enter into the extended guarantee because of the cost involved.
"The trading banks paid a far higher proportion towards being in the original scheme, subsidising the others," he said.
However, the trading banks were now seeing some stability and "semi-restoration" of interest rates, their own liquidity and profit margins.
South Canterbury has acknowledged it must wean itself off the extended guarantee scheme, which expires at the end of December next year and focus on regaining investor confidence to invest, or reinvest, with South Canterbury after that date.
The Treasury's website, updated earlier this month, said there were 99 companies or funds which have at some time taken part in the guarantee scheme, including the five which have gone into the extended scheme.
Who's in the Crown's extended retail deposit guarantee scheme:
• Marac Finance: included on March 11 until end-December 2011
• Equitable Mortgages: included on March 19 until end-December 2011
• PGG Wrightson Finance: included on April 1 until end-December 2011
• South Canterbury Finance: included on April 1 until end-December 2011
• Fisher and Paykel Finance: included on May 17 until end-December 2011
