South Canterbury Finance has won some badly needed breathing room, yesterday saying it had reached an agreement with a consortium of five US note holders owed US$100 million ($134 million) to repay them over the next 5 months.

The US private placement investors had the right to require immediate repayment after South Island millionaire Allan Hubbard's finance company breached "certain covenants" following release of South Canterbury Finance's June year audited financial statements at the start of this month.

The agreement, which has yet to be finalised, will enable South Canterbury to unwind currency swap hedges in place on the US Private Placement which will release cash for the company.

South Canterbury, New Zealand's largest locally owned finance company, said it was now moving to register a new prospectus for the issue of debenture stock which will enable it to recommence raising funds from the public.

It is also in the final stages of arranging a $75 million credit facility with "a new third party provider" which was expected to become effective within the next week.

South Canterbury also confirmed that a so far unused $100 million standby bank loan facility, placed on a "stop draw" after its credit rating was downgraded by Standard & Poor's in August, had been cancelled by "mutual agreement".

South Canterbury is covered by the Government's retail deposit guarantee, and said it intends applying for the extended scheme when the current term runs out in October next year.

"In order to be accepted into the extended Crown guarantee scheme, the company will need to meet certain eligibility criteria and be accepted for participation by the Secretary to the Treasury."

The company was working with its principal shareholder, Hubbard's Southbury Group, and advisers Forsyth Barr and Harmos Horton Lusk on a restructuring and recapitalisation programme.

Media have reported the company is considering a sharemarket listing.