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Taxpayers won’t see Nomura’s price for SCF loans until Dec

Taxpayers won’t see Nomura’s price for SCF loans until December

by Paul McBeth

Aug. 18 (BusinessDesk) - Taxpayers will have to wait until December to find out how much they’ve lost on the core loans belonging to the failed South Canterbury Finance Ltd.

That’s the earliest the market value of SCF’s portfolio of core loans, which have been sold for an undisclosed amount to Japan investment bank Nomura Holdings, will be disclosed.

Receiver William Black of McGrathNicol told BusinessDesk the next report, due on Dec. 20, will show what Nomura paid for SCF’s consumer, business and rural loan portfolios, which had a book value of $123 million, though he said it may be too early to estimate the likely recovery from the receivership.

That’s down from the $579.8 million value of the three portfolios since the receiver’s first report in November last year.

While SCF received $238.7 million in loan repayments from across its total lending portfolio, and $59 million from related party loan repayments by the end of February, it is unknown how much of this related directly to SCF’s core loans.

Black said the receiver hadn’t made any major write-downs in the value of the portfolios, and that it was a moving feast as money was repaid through the “ongoing process and prudent management” of the loan book.

The Overseas Investment Office had not received an application to buy the loan books, a spokesman said.

SCF has already sold its stake in Scales Corp. to Direct Capital for $44 million and Helicopters NZ Ltd. to Canadian Helicopters Group for $154 million. It sold more than $100 million of loans from Face Finance for an undisclosed sum to GE Capital, along with its stake in Financial Synergy Ltd. and some dairy farms for undisclosed sums.

If the sales achieved book value, that means the most SCF’s receivers have made from asset sales is about $421 million with just the so-called ‘bad bank’ assets and the 33% stake in Dairy Holdings left on its books.

Black said it is too early to give any guidance on the prospects of the programme to squeeze value from SCF’s ‘bad bank’ assets.

The Timaru lender’s property loans, which made up a large portion of the troubled assets, were valued at $256.2 million as at Aug. 31 last year when the receivers were called in.

“Managing those loans is a very significant workstream and has the potential to take up to two years to recover,” Black said. “It’s too early to give any clear guidance.”

SCF’s failure prompted a $1.6 billion call on the government’s retail deposit guarantee scheme, and the Crown paid out all other creditors to assume control of the failed lender.

The net cost of that call has ballooned from the initial $400 million to $500 million cost flagged by Prime Minister John Key.

The Serious Fraud Office has yet to decide on whether it will pursue prosecution over SCF’s failure, and is looking at a handful of the lender’s transactions. The white-collar crime investigator charged SCF owner Allan Hubbard with 50 counts of fraud in relation to his investment vehicles Aorangi Securities Ltd. and Hubbard Managed Funds.

(BusinessDesk) 17:13:44

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