Market speculation that South Canterbury Finance is about to re-release its August prospectus for debenture bonds could be overshadowed if a United States funding consortium withdraws its $US100 million ($NZ135 million) debt facility, and additionally asks for penalty interest payments.
The $US100 million facility is South Canterbury's most pressing problem, according to one source close to the finance company, with all efforts at present focused on resolving the US funding issue.
"Once that aspect is solved, everything else should fall into place," the source said of other refinancing options.
A "positive" announcement was expected to be released before the middle of next week, the source said.
The 83-year-old Timaru-based company, the largest private finance company in the country, is well past its own September 30 deadline for releasing the debenture stock prospectus.
With impaired loans and past-due-date loans in excess of $350 million and about $1 billion due in debenture releases during the coming year, South Canterbury needs a "white knight" investor, Craigs Investment Partners broker Peter McIntyre said yesterday.
"I doubt if South Canterbury will go for a public listing now with the number of issues investors have had to digest.
They desperately need a white knight," he said, saying that could be in the form of a hedge fund, investment bank or private equity injection.
In mid-August, international rating agency Standard and Poor's downgraded SCF bonds from investment grade to non-investment rating, effectively junk bonds, and a month later South Canterbury placed debenture funds into trust and ceased taking new securities as it sought to amend and reissue a prospectus put out in August.
The downgrade triggered an entitlement that a consortium of US investors had three months in which it could call in $US100 million of funding extended to South Canterbury.
Mr McIntyre said, aside from the loan itself, the penalty interest payments, and possibly break fees, could total millions of dollars.
A sharemarket float was mooted in early August, with Mr McIntyre picking at the time more than $200 million would be sought, based on SCF's loan book growth to $1.6 billion, but that would not be attractive to investors at present, he said.
Shareholder and South Canterbury chairman Alan Hubbard had injected $45 million into the company, and underwritten a further $25 million, but Mr McIntyre believes Mr Hubbard's financial resources have been "used to their fullest extent".
South Canterbury is also teetering on the edge of its minimum S&P rating at BB+ and should it be downgraded further it would fall outside the Government's guarantee scheme.
To remain in the extended scheme until October next year could cost South Canterbury an estimated $20 million to $25 million.
