South Canterbury Finance is expected to announce this week an offer of longer term debentures to offset a looming more than $1 billion "wall of maturities" due later this year.
Last week, the troubled company was included in the Government's extended retail deposit scheme from October 12, after it only just met the Government's minimum criteria with a BB credit rating from rating agency Standard & Poor's.
The 85-year-old company is undergoing a massive restructuring and equity-raising and, had it not achieved inclusion in the guarantee scheme, it may have faced receivership.
Craigs Investment Partners broker Peter McIntyre said South Canterbury's prospectus was likely to target the "longer-dated end of the market" to get its maturity profile in order.
"South Canterbury don't want to be in a position where it has a wall of maturities needing repayment, and no cash to make repayments," he said of the more than $1 billion coming due during the next seven months.
He believed South Canterbury would be offering debentures in the two- to five-year range, or "innovative" roll-over terms to existing debenture holders to maintain their loyalty and reinvestment.
"Its [roll-over] terms could be extremely attractive interest rates; using the crown guarantee as a basis for that offer," Mr McIntyre said.
Following announcement of the crown guarantee last week, South Canterbury preference shares enjoyed a more than 40% gain in value, rising from 30c to 42.5c.
The 100 million shares, issued for $1 each in December 2006, had extremely low trading volumes until Tuesday this week, when 119,000 shares changed hands.
A South Canterbury investment statement released in early February said $491 million was due to be repaid by June and a further $640 million by October - a total of $1.13 billion in debentures and bonds.
At the time, roll-over reinvestment was a positive 55% of funds.
"South Canterbury will want to be borrowing long [term] to lend shorter [term]," Mr McIntyre said.
In its report on the half year to December, released in early March, South Canterbury posted a six-month loss of nearly $155 million, worse than market expectations.
South Canterbury said at the time its provisions for losses on impaired or non-performing assets had increased by $180.3 million, resulting in the unaudited after-tax loss of $154.9 million.
Mr McIntyre estimated at least about 24%, or $408 million, of South Canterbury's $1.7 billion loan book was at present impaired, largely from within its property portfolio, and that percentage was likely to increase.
South Canterbury chief executive Sandy Maier said last week several achievements had been made since the appointment of a new board late last year, including a significant group restructuring, with the provision of $152.5 million of new equity in February 2010 and the acquisition of Helicopters NZ Ltd and Scales Corporation Ltd, which have records of strong earnings.
There was also a "purge of the loan book" and increased provisioning for impaired assets totalling $203.7 million.
"Taking into account the $22 million of new equity provided by Torchlight Fund No.1 LP, just over $200 million, in total, of new equity has been injected into South Canterbury Finance since December 2009," Mr Maier said.
He told The New Zealand Herald a new prospectus would be issued this week offering both guaranteed and non-guaranteed deposits.
He said the company was not after a specific sum of money but would be "pretty aggressive" in its marketing of the investments.
Mr Maier said he expected about 90% of the money raised would still come under the guarantee but the company would begin offering non-guaranteed investments because it recognised it "had to start sometime".
South Canterbury was looking at ways to wean itself off the extended guarantee, which rolled over on October 12 and finished at the end of 2011, he said.
"We plan to break the business into divisions with a good business and bad business split.
We have already started doing that internally," Mr Maier told the Herald.
The company would try to sell some of its assets and may take up a partner to help with its bad assets.
Mr Maier said South Canterbury planned to raise money to help extend its deposit profile, as many of its investments were due to be paid back around September or October.
At June 30 last year, South Canterbury had $2.1 billion in borrowings.
