South Canterbury Finance tried to pressure Treasury into giving it conditional acceptance into the extended deposit guarantee scheme in a bid to pull off a debt-for-equity swap deal with another frozen finance company.

The details of the failed finance company's application to get into the initial retail deposit scheme, the extended scheme and correspondence since receivers were appointed on August 31 were revealed yesterday in a mass release of documents by Treasury. The documents include many deletions of commercially sensitive names and material.

Timaru's South Canterbury Finance initially applied to be part of the extended deposit guarantee scheme on January 19, citing in its favour the appointment of chief executive Sandy Maier, three new independent directors and injections of new equity into the business.

It used a credit rating upgrade by Standard & Poor's to back up its application - an upgrade which surprised Treasury.

"The rating is surprising given previous commentary from S&P and appears to be based upon the strength of a recapitalisation proposal, the details of which are not yet public information," the department said in a February report which estimated South Canterbury was "high risk" and could fail by June, with a loss between $500 million and $550 million predicted.

Within a week Standard & Poor's downgraded South Canterbury's rating from BB+ to BB and placed it on credit watch negative.

But the company forged ahead with a recapitalisation plan, putting its proposal to the Government on February 16 with a strong emphasis on what was in it for the taxpayer.

It also spelled out exactly what it wanted from the Crown, even giving it deadlines.

"Approval of independent experts for Helicopter NZ/Scales acquisitions: needed now. Acceptance into extended retail guarantee scheme: requested by transaction announcement date (February 28) assuming recapitalisation transactions confirmed."

Two days later Forsyth Barr, writing on behalf of South Canterbury, also called for Treasury to give an indication of whether the company would be accepted by February 24. But Treasury said "conditional approval" would not be possible and a decision could not be made until more information was provided by SCF and its trustee.

It was not until a Treasury report on an update into the deposit guarantee scheme was released that the reason for the pressure is revealed.

"SCF have two main pillars to their recapitalisation plan. The first involves intra-group transactions moving Helicopters New Zealand and Scales Corporation into SCF from Southbury Group ... The second pillar involves a transaction with [blanked out] - a finance company currently in moratorium. This transaction would be similar in substance to the transaction involving [blanked out]. In this case it would involved debenture holders in the [blanked out] receiving an equity stake in SCF in lieu of their claim in the moratorium of [blanked out]."

It is never stated who the company is. Treasury said SCF had asked it to write to the trustee of the frozen finance company to indicate support of SCF's inclusion in the extended guarantee to pave the way for the recapitalisation.

But Treasury would not agree to do so and the deal never occurred.

South Canterbury was included in the extended guarantee but only after it asked its auditors Ernst & Young to call Treasury and discuss the audited accounts. SCF collapsed on August 31, triggering a $1.6 billion payout under the original Crown Deposit Guarantee Scheme.