Rescuers put themselves first

The rescue plan being put together by finance companies and advisers for Provincial Finance has fallen through after becoming too expensive. However it appears Provincial debenture holders will get their money back.

Monday, June 12th 2006, 6:44AM

On Friday Timaru solicitor Edward Sullivan, who is also chairman of South Canterbury Finance, said that the rescue plan proposals were unsuccessful. Also on Friday the receivers gave an update on progress.

Sullivan says the consortium had to protect their own businesses and he indicated that South Canterbury may have suffered a little by being associated with the plan.

"We need to consider our own companies," he said. "There had been considerable confusion in the public mind about South Canterbury Finance's role in the proposed rescue package."

"We want to assure all our investors and investment advisers that it was never our intention to take a shareholding in Provincial Finance."

Sullivan said South Canterbury Finance made an offer for a proportion of Provincial's loan book. "The sole reason for doing this was to improve Provincial's financial ratios to satisfy the trustee's requirements."

While South Canterbury were the finance company publicly associated with the plan, a number of other companies are also understood to have had some level of involvement.

Likewise advisers had been approached about helping fund a rescue.

Sullivan says a careful restructuring could save Provincial. Under a scheme of arrangement debenture holders could allow part of their debentures to become equity.

Meanwhile the receivers are being cautious about the potential outcome for debenture holders. “The final result is dependent on a number of factors – most importantly the quality of the loan book and its ultimate recovery," they say.

"At this stage it is anticipated debenture holders will recover most, if not all, of their investment over time. As the likely level of recovery from the loan book becomes clearer, so too will the likely returns to debenture holders.”

They say there will be no repayment of principal or payment of interest to debenture holders until investigations are further advanced.

An interim distribution to debenture holders is being planned for the end of September 2006, however the size of this payment is unknown at this stage.

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