The bonds and preference shares had weakened markedly before South Canterbury this week re-released its long-awaited August prospectus for capital-raising through new debenture securities, and the potential for a $75 million private placement.
The 83-year-old finance company, with a loan book valued at more than $1.6 billion, faces making large repayments on several fronts in the months ahead and tightening loan facilities for itself.
These issues are compounded by a recent Standard & Poor's downgrading.
The company does not want this to fall further or it will be outside the Government's deposit guarantee scheme - an unattractive proposition for investors.
Craigs Investment Partners' broker Peter McIntyre said maintaining its Standard & Poor's ranking, at present on negative credit watch on its BB+ rating, was "crucial" to South Canterbury, lest it slip one more notch and fall outside the Government's minimum rating requirement and be excluded from the Government's extended deposit guarantee scheme.
South Canterbury Finance had a lot to consider, but the Standard and Poor's rating was the most important, he said.
The preference shares now had a firmer trading tone, while the bonds were increasing in value.
"South Canterbury still have huge issues and hurdles ahead of it, but they have put a plan to investors through [release of] the prospectus.
Investors are still grappling with how this works," he said.
Almost three years ago, $1 preference shares were issued, raising $100 million, but twice this month they hit all time lows of 23c.
Since then they had rebounded to about 35c.
Last week, 1.1 million shares changed hands, as opposed to more than 350,000 this week.
Mr McIntyre said the steadying in volumes was a good sign, as was the retracement from last week's lows.
However, the price was still low, and there remained more sellers in the market than buyers.
Similarly, its three bond tranches had settled from earlier volatility.
There was no change over the past fortnight in the yield of bonds maturing in 2010; the yield was still at 7.5%.
This comes under the Government's deposit guarantee.
The 2011-maturing bonds, which were yielding 19.7% a fortnight ago, had gained value and were yesterday at 15.5%.
With this week's prospectus announcement, South Canterbury confirmed it intended applying to join the extension of the Government's deposit scheme, beyond October 2010, which, it has been estimated, will cost it between $20 million to $25 million.
Mr McIntyre said investors in the mid-date 2011 bonds were more stable and factoring in the likelihood the bonds would be included in the extension period.
However, the 2012-maturing bonds remained at a 22% yield, the same as a fortnight ago, because the longer dated bonds carried greater risk, Mr McIntyre said.
Last week 290,000 2012 bonds were traded, while this week more than 400,000 were traded.
