South Canterbury Finance

South Canterbury Finance was New Zealand's largest locally owned finance company when it collapsed in August 2010, triggering a $1.6 billion bail-out of investors deposits by the New Zealand Government.

In 1926, South Canterbury Finance Ltd started as a small-time lender to local businesses and households in the south Canterbury town of Timaru. It was then named South Canterbury Loan and Finance and it specialised in small personal loans.Allan Hubbard bought South Canterbury Finance in either the 1950s or in 1960. By 1992, South Canterbury Finance had become New Zealand's 10th largest finance company. In 1992 it was the seventh largest. Hubbard was considered the driving force behind the company's growth as it ultimately became the largest financial institution in the South Island. By the late 2000s, South Canterbury Finance had 35,000 investors and its assets were considered to be worth almost $NZ2 billion. South Canterbury Finance owned 13 companies including fruit packaging and warehousing company Scales Corporation, helicopter and tourism business Helicopters NZ, and a third shareholding in Dairy Holdings Limited, New Zealand's largest dairy farming group.

In November 2008, SCF was accepted into the New Zealand Deposit Guarantee Scheme.

In June 2010, Allan Hubbard stood down as Chairman of South Canterbury Finance and was replaced by Bill Baylis.

Despite its reputation as a South Island rural lender, South Canterbury Finance had made loans to property development throughout New Zealand, Australia and Fiji. At 30 June 2009, property loans were $414.2 million. Real estate lending represented 207 loans with an average net loan value of $1.15 million. Further, 37 per cent of lending was secured by a second or lower ranking mortgages. There were ten property loans greater than $10 million. For some lending, the interest was capitalised into the loan debt, so borrowers did not have to immediately fund interest payments. One example of a bad property investment was Oakridge Resort, the largest resort in Wanaka. In September 2009 Oakridge went into receivership, after a default on loan payments for a collapsed a 48-villa 25-hectare development. SCF was owed millions of dollars.

As of December 2009, SCF had $1.55 billion of deposits and debentures which were guaranteed under the government's Crown Retail Deposit Guarantee Scheme until October 2010. Rating agency Standard and Poor's stated that SCF had "urgent problems to tackle" and it moved SCF from "negative creditwatch" to a BBplus credit rating. South Canterbury Finance appointed corporate recovery specialist Sandy Maier as chief executive with a brief to restructure the finance company and its loan book.

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