The credit rating for South Canterbury Finance (SCF) has been lowered on concerns about its key shareholder and founder, Allan Hubbard, Standard & Poor's said today.

The Serious Fraud Office is investigating Hubbard's Aorangi Securities in response to concerns raised by the Registrar of Companies.

Statutory managers were appointed to manage Aorangi's affairs, and those of Allan Hubbard and his wife, on Sunday.

SCF is owned by Southbury Corp, which is owned by Hubbard and his wife, but is excluded from the statutory management.

S&P lowered its long-term credit rating to B- from B+, and placed it on CreditWatch Negative.

The short-term rating was lowered to C from B, and also placed on CreditWatch Negative.

"The downgrade reflects our view that news surrounding SCF's key shareholder will likely erode debenture investor confidence, which is critical to SCF's ability to manage its liquidity and its significant debenture reinvestment requirement," S&P said.

"We are also now concerned that the company's recapitalisation efforts could be compromised or delayed."

There was greater concern now about support from Hubbard.

There was a chance the rating could be lowered again.

Earlier today, Serious Fraud Office director Adam Feeley says SFO staff have visited the offices of Allan Hubbard's Aorangi Securities in Timaru and are satisfied an investigation into suspected serious or complex fraud is necessary.

Feeley said the SFO had started an investigation after careful consideration of information received from the Registrar of Companies.

The visit to Aorangi's offices came after concerns were raised with the SFO by the Registrar of Companies and a working relationship had been established with Grant Thornton, the statutory managers appointed to run Aorangi and Alan Hubbard and his wife Margaret's affairs.

Feeley said that the SFO's investigation was an immediate response to an earlier investigation by Companies Office staff appointed under the Corporations (Investigation & Management) Act and the Securities Act.

"Based on the information we received from the earlier report, we were satisfied that, not only was it in the public interest to commence an inquiry, but that the inquiry should be conducted under Part 2 of the SFO Act - that is, it should be an investigation of suspected offences involving serious or complex fraud," said Feeley.

The SFO's statement comes after the Government announced on Sunday it had put Aorangi Securities, seven charitable trusts and both Allan Hubbard and Margaret Hubbard into statutory management.

This followed the Companies Office referring a number of matters relating to Aorangi Securities for investigation by the SFO for potential breaches of the Crimes Act. The investigation follows a complaint by an Aorangi investor who had not received a prospectus.

The Companies Office found that NZ$98 million in funds lent to Aorangi by 407 Otago and Canterbury investors had been lent on either directly or indirectly to trusts and interests associated with the Hubbards, contrary to instructions that they be lent as first mortgages secured by property.

Hubbard came out swinging against the Government's decision to put him into statutory management, describing it as "completely unnecessary and contrived."

Meanwhile South Canterbury Finance, founded and owned by Hubbard, said it had reissued its prospectus on Tuesday after pulling it yesterday following the weekend developments.

In its prospectus and investment statement South Canterbury Finance warns Hubbard's plight could hinder its ability to raise money.

The appointment, on June 20, 2010, of statutory managers in respect of Mr and Mrs Hubbard, Aorangi Securities and seven charitable trusts associated with Mr and Mrs Hubbard could adversely affect the ability of the company to raise funds from the public given the long standing relationship that Mr and Mrs Hubbard have had with the company and the public perception likely to be created by the appointment of statutory managers in respect of Mr and Mrs Hubbard."

South Canterbury Finance also said, however, that the implications of the statutory management for the various arrangements between it and entities associated with the Hubbards were unclear at this stage.

"The Company is currently working through matters in detail to identify the consequences for it, both direct and indirect, as a result of the statutory management appointments. South Canterbury Finance was not relying on Mr and Mrs Hubbard to provide further capital to the company as part of its current capital raising initiatives."

"Accordingly, the company will continue to progress its capital raising initiatives. Further announcements will be made by the company as and when the company is in a position to do so."

Feeley said the SFO's two initial priorities were to ensure any evidence relevant to issues highlighted in the Registrar of Companies' report was secured by its investigators; and to make sure the SFO's investigation complemented, rather than compromised, the statutory managers' work.

"We have established a good working relationship with the statutory managers, and are confident that our respective tasks will have proper regard to investor interests, as well as ensuring there is an orderly investigation," Feeley added.

He said the SFO would not comment on the scope of its inquiries other than confirming it would examine concerns raised by the Registrar of Companies over whether any or all of the NZ$134 million of investors' money deposited with Aorangi had been received after proper disclosure, and whether the investors' money was dealt with in a manner consistent with representations made to investors.

It was too early to estimate how long the investigation might take, Feeley said. However, the volume of documents needing to be analysed, plus the number of people to be interviewed, suggested it would be several weeks before the SFO could comment on timeframes.

"This is an investigation of major importance to our financial markets, and the need for a thorough and fair investigation cannot be compromised by the understandable desire for early answers," said Feeley.