Preference shares in South Canterbury Finance, issued at $1 four years ago, took another knock yesterday, plunging from their previous record low of 20c earlier in the week to 15c, albeit on light volumes.
SCF yesterday released its $1.25 billion prospectus for the second time in three days after international rating agency Standard and Poor's downgrade on its investment status.
The downgrade was prompted by some of the private entities of major shareholder Allan Hubbard being under investigation by the Serious Fraud Office after allegations of irregularities.
SCF itself is not under investigation and is excluded from the statutory management order imposed last weekend by the Government over Mr Hubbard's private mortgage company, Aorangi Securities, and seven trusts.
Craigs Investment Partners broker Peter McIntyre said the combination of investigations into Mr Hubbard, the placing of eight private Hubbard entities into statutory management and a "continual barrage of media coverage" had affected SCF negatively.
The company was working overtime to get itself into a good position, but at present for every step forward it seemed to have to take two back, he said.
Fortunately for South Canterbury Finance, it was in the Government's extended retail deposit scheme until the end of next year, he said.
There was also potential for the company to receive a multi-million dollar "equity punch" from an overseas investor with whom Mr Hubbard was negotiating.
The downgrade "was not the best news" for SCF, but there was a possibility of some good news soon, Mr McIntyre said.
The SCF prospectus amendment yesterday outlined S&P's concerns, including that investigations into Mr Hubbard would "likely erode debenture investor confidence", the appointment of statutory managers to his eight entities might "compromise or delay" recapitalisation efforts and SCF's cash balance was not increasing as rapidly as expected.
SCF's chief executive, Sandy Maier, said the two-tier, long-term downgrade from B+ to B- and short-term from B to C, with both on credit watch negative, implied a further downgrade within the next three months.
"South Canterbury Finance recognises that its credit rating is an important factor for investors and remains committed to improving the rating over time," Mr Maier said in the prospectus.
Both Mr Maier and chairman Bill Baylis have said there were historical loans between Aorangi and SCF, but there was nothing on the books at present.
"We had loan officers go through to see whether there's something current and they say there's none," Mr Baylis said.
Richard Simpson and Trevor Thornton, of Grant Thornton New Zealand, appointed on Sunday as statutory managers to Aorangi Securities Ltd and the business interests of Mr Hubbard, say a letter will be sent to the more than 400 investors in Aorangi Securities to confirm details of their investments.
The managers said they were making good progress in understanding both Aorangi Securities and the business interests of Mr and Mrs Hubbard.
