SCF is forced to deal with the continuing malaise from the Standard and Poors rating downgrade in August, down from BBB- to BB+, taking the investment into non-investment, junk-bond territory and one step above exclusion from the Government's retail guarantee deposit scheme.
Also of concern, stemming from the downgrade, are talks between SCF and a consortium of five subscribers to a $US100 million ($NZ145 million) private placement facility.
Because of the downgrade, the facility is entitled to seek early repayment within three months.
In a market update yesterday, chief executive Lachie McLeod said SCF restructuring and capital-raising initiatives were continuing.
Announcements would be made soon, he said.
SCF had ceased to allot securities under the prospectus released on August 21, pending either amendments or a replacement prospectus.
"Accordingly, all funds received by the company after August 20, 2009, have been placed in trust on behalf of subscribers," Mr McLeod said.
Craigs Investment Partners broker Peter McIntyre said the August downgrade and change to the $US100 million facility were "material changes" and meant more information had to be delivered to shareholders, either in an amendment or new prospectus.
"It's prudent that the funds received [after August 20] be put into trust and not pooled with other investor funds," Mr McIntyre said.
On the issue of the $US100 million private placement facility, Mr McLeod said SCF "had constructive discussions" with investors about their intentions after the downgrade.
"The rating downgrade entitled those investors to require repayment after the expiry of three months following the downgrade.
"These discussions are continuing," he said.
If the US facility were called in early, that would be detrimental, but talks appeared positive, Mr McIntyre said.
SCF's provision for loan defaults had risen from $8.6 million a year ago to almost $50 million.
Its previous before-tax profit of $88.8 million for 2007-08 had become a $71.2 million loss for the year to June 2008.
"Any early calling-in [of the $US100 million facility] would be stressful to SCF's balance sheet and could even prompt a further downgrade," Mr McLeod said.
As part of the SCF restructuring, Mr McLeod said the company was in "advanced discussions" with two potential new independent directors about their appointment to the board.
An announcement would be made to the market once confirmed, he said.
Also yesterday, SCF announced it would register a new and separate debenture stock prospectus by September 30, after the release of its audited accounts.
Despite shareholder chairman Alan Hubbard injecting $40 million and a further $25 million underwriting facility, SCF is under pressure because of related party loans to other Hubbard interests, estimated at about $130 million.
Those loans must be reduced to get an upgrade with S&P.
The August downgrade also carries a negative outlook from S&P - a one-in-three chance of further downgrading within a year.
Part of SCF's restructuring plans include a float of the company, with Craigs estimating more than $200 million being sought.
This is expected to be received positively by S&P.
