S Canterbury recovers about $140m from property

Sandy Maier. Photo / Supplied

South Canterbury Finance, which owes 30,000 investors $1.9 billion, has already quit some of its loan book and been repaid.

Sandy Maier, chief executive of the business with a Crown guarantee, said that in the past six months he had reaped about $140 million after properties were sold and loans were reassigned to other lenders.

South Canterbury, New Zealand's biggest finance company, has about 3000 loans of which $477.8 million or 32 per cent is to the real estate sector, an area which Maier admits has cost it dearly.

South Canterbury this month launched a prospectus to raise a further $1.25 billion to replace existing investments which are expiring and need to be rolled over.

Maier announced a three-way split of the loan book into:

* A good bank: loans of $700 million to $1 billion, which Maier said was a "go forward, completely clean business" where the firm is completely confident that its loans will be repaid.

* A bad bank: loans of about $500 million, mainly to the property sector which he said left him acting more like a receiver than a chief executive.

"These are loans that have not worked, loans not able to be repaid and we will continue to write them down if we need to."

* Private equity investments: Maier said it would have loans of $300 million to $400 million and include South Canterbury's related party businesses. These do not fall into either good or bad loans and include shareholdings in Helicopter (NZ) and Scales Corp.

Maier said the new three-way split gave him three distinct roles.

"I'm a private equity manager, I'm a receiver/manager and I'm running a finance company."

Maier and chief financial officer David Jarman have begun a road show to promote recapitalisation of the business which has qualified for the extended Government guarantee.

Maier said investors had already put about $350 million into the business in the past four months and he is confident he can get the $1.25 billion from the public.

The Government guarantee means the taxpayer would pick up the bill to pay back investors if the company failed over the next 18 months. Maier said the worst was now behind the business which revealed this month it had lost $198.6 million for the December 31, 2009 half-year.

He countered predictions by the Shareholders Association's Bruce Sheppard that South Canterbury would fail and would soon be run by an arm of the Government.

"Bruce is saying it's all going to end up with the Government but I have started to recognise some of the big, ugly stuff on the loan book. We paid the hard lesson in property, particularly."

He has refused to disclose any single property project, saying this would be unfair to the borrowers. But he admits South Canterbury funded "tens of millions" of loans to projects in Australia and Fiji and the business has admitted letting borrowers off paying ongoing interest by capitalising loans.

It has also revealed it has 37 per cent of its property loan book in subordinated positions of less than first-mortgage.