South Canterbury Finance has confirmed it has entered into formal due diligence with more than two interested parties to potentially take a multimillion-dollar stake in recapitalising the company.
In what yet could become another close-run decision, South Canterbury founder, former chairman and now chairman for life, Allan Hubbard, will have only weeks to stitch together an acceptable deal to revitalise South Canterbury and secure its future.
Industry speculation has it that South Canterbury will be looking for a $300 million-$400 million capital injection, which ideally must be finalised before the end of August, when a waiver to breach its trust deed expires.
Confirmation of due diligence comes while South Canterbury's senior management is nearing the end of a seven-stop countrywide roadshow, seeking to underpin the loyalty of existing investors to crucially roll over debentures and bonds, and to build confidence to attract new investors.
Following the sixth roadshow in Wellington on Wednesday, chief executive Sandy Maier confirmed to the Otago Daily Times yesterday that "more than two parties" were now in formal due diligence with South Canterbury, including at least one offshore party.
"Yes, We are in due diligence ...and there is some offshore interest," Mr Maier said when contacted for comment.
In recent weeks, an initial 15 suitors had been whittled down to a shortlist of five.
When asked if all parties were looking at a similar-sized stake and capital injection, Mr Maier said it was "too early in negotiations" to comment.
He reiterated earlier comments that it was now down to Mr Hubbard to negotiate and choose any new equity partner for South Canterbury, as it would be Mr Hubbard's stake in parent Southbury Corporation which was sold.
Mr Hubbard has injected more than $150 million into the ailing 84-year-old company, which has been burdened by more than $200 million of property-related losses.
There is some market speculation that the New Zealand subsidiary of Australia's Macquarie Group is showing some interest in South Canterbury, but Mr Maier declined to reveal the identity of any of the parties.
In recent months South Canterbury has faced myriad problems.
It has been downgraded several times by international rating agency Standard & Poor's, breached some covenants with a $100 million United States investor, staved off receivership in early April by its late inclusion in the Government's extended deposit guarantee scheme, has received several short-term waivers from its trustees, and been at loggerheads with auditors who raised concerns about "differences of opinion" over liquidity.
The S&P ratings have been a thorn in South Canterbury's side for some time, beginning with August 2009 when its bonds were downgraded from investment grade to a non-investment rating, effectively known as junk bonds in the sector.
Mr Maier told the Dunedin audience last week the "S&P ratings have been a drama" and scathingly described the ratings as coming from "two young guys in Melbourne, [with whom] we don't see eye to eye".
While South Canterbury has been purging its books as quickly, and as publicly, as possible to shed itself of toxic property debt, Mr Maier told the Dunedin investors last week there was a "possibility" of more impairments or writedowns in future, but he was confident the company was on the right track to a successful restructuring.
