SCF 'unlikely' to be bought as single entity

Investment banker Mark Clare says there is 'little chance someone will take over the whole thing'. Photo / Mark Mitchell

The chances of selling South Canterbury Finance as a whole are likely to be close to zero, says an expert in distressed asset sales.

Receivers for the failed finance company yesterday called for expressions of interest in South Canterbury's assets which include a range of loans as well as stakes in apple exporter Scales Corporation, a helicopter lease business, and Dairy Holdings.

McGrathNicol's Kerry Downey and William Black were appointed to run the receivership on August 31 after the company couldn't get a recapitalisation plan together.

Yesterday Downey and Black said they had already fielded a significant number of inquiries from prospective buyers and were working with the Crown to compile a register of interest.

But they urged others to register interest as well.

A spokesman for the receivers would not say how many parties had already confirmed interest but said it was several.

The spokesman said the receivers were open to interest for both the business as a whole and individual assets.

"Whether they are sold in one lot or in several pieces will be determined by what expressions of interest are received. It's a matter of achieving the best outcome."

The Government has already shelled out $1.77 billion on the company, with $1.6 billion going to depositors covered under the Crown's deposit guarantee scheme and a further $175 million used to buy out first-ranking debtors.

It initially hoped to recoup nearly $1.2 billion of that with the final cost put at $600 million, but yesterday Prime Minister John Key said it was more likely to be $300 million to $400 million. One party expected to show interest is rich-lister businessman George Kerr, who runs the private equity Torchlight Fund.

A spokesman for Torchlight said there could be opportunities arising from the receivership of South Canterbury but there were many opportunities across Australasia at the moment that it was considering.

Investment banker Mark Clare, who runs valuation website Value Cruncher, said a lot of parties would be expected to look at the business but he rated the chance of selling South Canterbury Finance as a whole as close to zero.

"There is little chance someone will take over the whole thing. It's about zero. Some people will be very interested in components. The performing loans will be of interest. But there will certainly be a component that is hard to move."

Clare said the higher quality assets could be packaged up and sold quickly but others would take longer.

"There is still probably a lot of hard work to be done to determine what can be exited."

Another industry source predicted there would be a lot of interest in the good assets but said it was unlikely the business would be sold as a whole unless it was to a foreign buyer.

A successful sale could also depend on whether the Government decided to separate out the "bad bank" assets.

The source said the challenge would be to keep the value of the assets up as the sale process ran as a certain amount of capital was needed to keep businesses operational.

Yesterday the receivers said they had made considerable progress in assessing and stabilising the group's operations.

"Over the past week, we have secured the support of senior management and staff and we are now working with them, and with other stakeholders, to plan how we will support the continuing business operations of the group, and to begin preparing the group's assets for a formal sale process."

The receivers are also expected to release a report this week updating South Canterbury Finance customers on matters affecting business operations including funding arrangements.

THE COMPANY

35,000 - Number of investors
$1.6b - Payout to depositors
$175m - Payout to first ranking debtors
$300m-$400m - Latest cost estimate