All eligible South Canterbury Finance depositors remain covered by the Crown retail deposit guarantee scheme, but the cover comes at a cost as the finance company's credit rating falls.
Treasury director of financial operations Dr Brian McCulloch confirmed that SCF depositors remained covered under the guarantee scheme.
The Otago Daily Times had been contacted by concerned investors after the announcement that Aorangi Securities, Allan Hubbard, his wife Margaret (Jean) Hubbard and various charitable trusts had been placed into statutory management.
Dr McCulloch said the announcement on Aorangi did not apply to SCF.
A Treasury spokesman told the ODT there was a clause in the retail deposit guarantee allowing the Government to withdraw a company from coverage, but it had been used only twice.
Viaduct Capital had been withdrawn from the scheme after the company restructured its affairs and FAI Money was withdrawn when the depositors were repaid, leaving no depositors to be covered by the scheme, he said.
However, each time a company was downgraded, it cost it more to remain in the scheme.
Craigs Investment Partners broker Peter McIntyre estimated that the cost to SCF to remain in the scheme had risen from about $20 million to more than $30 million as its credit rating had fallen.
The company's long-term credit rating fell this week to to B-, the short-term rating to C, and both were placed on creditwatch negative by Standard and Poor's.
"If they weren't in the scheme it would be catastrophic for them.
It is imperative SCF remains in the scheme to encourage depositors to apply funds towards their book," Mr McIntyre said.
A potential conflict of interest was noted for a member of the Securities Commission which recommended Mr and Mrs Hubbard be placed into statutory management.
Securities Commission member Simon Botherway declared he had a potential conflict of interest in the Hubbard case as the brother of businessman Jonathan Botherway, The Dominion Post reported.
Jonathan Botherway's hospitality empire collapsed in July 2009 after SCF, then owed $7.8 million, put it in receivership.
Chairwoman Jane Diplock did not believe there was a conflict.
Supporters of Timaru-based Mr Hubbard are funding an advertising campaign rallying support for the 82-year-old businessman, while McDouall Stuart's head of research, John Kidd, said it was difficult to understate the gravity and implications of the decision to appoint a statutory manager.
"It is in all parties' interests to resolve this matter urgently.
The market desperately wants and needs to see someone that they had until now trusted and respected show that they were and are deserving of that faith.
"If the market is proven wrong, the result will be a further body-blow in confidence to a sector that is already on its knees. If the market is proven right, the regulator will need to seriously address confidence issues in itself," Mr Kidd said.
