You may get 10 different answers on the value of Hanover's loan book, says one insolvency practitioner. Photo / Brett Phibbs

You may get 10 different answers on the value of Hanover's loan book, says one insolvency practitioner. Photo / Brett Phibbs

New Zealand's own sub-prime crisis, the finance company collapse that began with a trickle of failures in 2006 and became a landslide by 2008, entered a period of remission last year with the introduction of the Retail Deposit Guarantee Scheme.

But information from Treasury about the scheme and action by the likes of Hanover, Allied Farmers and Pyne Gould Corporation indicate finance companies are about to go through another period of turmoil.

In what may well prove to be the end-game for the sector in the current business cycle, the removal of state-funded life support for most finance companies will result in a spate of what is euphemistically referred to as "consolidation" - but could also be described as marriages, deaths and cannibalism.

This time though, it is not the hapless retail investor who bears the brunt of inevitable losses, it will ultimately be the taxpayer.

Shrewd, well capitalised opportunists, on the other hand, are even now placing bets there will be some good money to be made picking over the remains of the failures and filling the space they leave.

Treasury set aside an $816 million provision in the June quarter Crown accounts to cover claims under the guarantee it deemed were "more likely than not" to occur.

Three months later the sum had risen by a further $47 million to $863 million.

Even as the guarantee was introduced in October last year, covering the finance company sector as well as banks, there were expectations it would distort investment markets and prove difficult to unwind.

Although it has now been extended, the new terms coming into effect when the initial scheme expires on October 12 next year, such as a minimum "BB" credit rating and higher fees, means most except the biggest and best capitalised will have little chance of qualifying.

That has fired expectations a number of finance companies will "hand the keys to Treasury" while they still can to ensure investors' cash is not lost.

Indeed it could potentially be seen as negligent not to do so if they know their chances of surviving without the guarantee are slim.

Given it was introduced in such a rush and has been subject to a number of tweaks on the fly, it's not surprising that there is a somewhat patchy understanding of its mechanics.

Treasury itself admits it is not entirely sure how things will unfold as the now inevitable-looking avalanche of failures and resulting claims gathers momentum.