Fran O'Sullivan: Wire gets higher for Maier

Sandy Maier has been working hard to keep depositors onside. Photo / Steven McNicholl

South Canterbury Finance boss Sandy Maier is no stranger to the financial highwire.

But Maier will still have to surmount significant hurdles if he is to secure new shareholders for the troubled finance company without a savage discount after the very public launch of fraud investigations into its founder president Allan Hubbard.

It matters not one whit that Hubbard stood aside from active involvement in the company earlier this year.

It was the Hubbard brand that sustained extraordinary loyalty among South Canterbury Finance depositors during the long-winded wipeout of the finance company sector.

The founder's PR agents milked the Hubbard brand for all it was worth to persuade investors to roll over their deposits and pump more cash into the company at a time when other finance companies were going belly-up.

The other major factor which has sustained South Canterbury Finance long beyond what many would consider its sell-by date is its Government guarantee.

Maier has been working hard to keep the depositors onside.

This has not been an easy feat made even more difficult by trying to carry this out in the full media glare. He has had some success but is still facing a shortfall.

Which is where the putative offshore investor/investors come in.

Although Hubbard had stood down from day-to-day governance responsibilities for South Canterbury Finance he was still integrally involved through his negotiations - as a shareholder - to obtain the additional equity which would have in all probability resulted in a significant diminution of his shareholding.

By putting Hubbard and his wife Margaret (known as Jean) into statutory management with Aorangi Securities and a number of associated charitable trusts, a major player is removed from the South Canterbury chess board.

The statutory managers can now step into Hubbard's shoes and cut any deals on "his behalf". They will be less inclined to try and make any deal fit within the labyrinthine schemata behind Hubbard's overall investment strategy.

There is obviously a huge potential for conflicts of interest here.

But it is not difficult to reach a conclusion that it suits a wide range of interests - including the Government - for the Aorangi statutory managers to also act as commercial in loco parentis for the Hubbards.

But any Government guarantee comes with fish-hooks.

If the additional equity cannot be secured (Maier is still confident this will occur) the taxpayer may find itself "tail-end Charlie" if the Government guarantee has to be called on in the event of major defaults.

It will take considerable time for the back-story to emerge.

But to all intents and purposes Maier has been acting as a de facto statutory manager since the South Canterbury board - aka Hubbard - appointed him chief executive late last year.

What's been missing is the ability for Maier to freeze the company's situation and compromise creditor claims.

Since Hubbard was put into a commercial strait-jacket there have been calls to put South Canterbury Finance into statutory management.

This is somewhat premature given the Government guarantee. But Standard & Poor's decision yesterday to drop the credit rating will not help things.

Around the traps the more excitable are saying Commerce Minister Simon Power's decision to put the Hubbard pair - Allan and his wife Margaret (known as Jean) - into statutory management is reminiscent of Venezuelan President Hugo Chavez.

The Serious Fraud Office has wasted no time in setting the record straight from its perspective.

Director Adam 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.

The critical aspect of yesterday's announcement was Feeley's uncompromising statement that the SFO was investigating suspected fraud.

As the statement noted: "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 seriousor complex fraud."