Key rejects claim govt to blame for SCF’s woes

• Tweet

Prime Minister John Key rejected claims the government’s decision to place Allan Hubbard and some of his business interests under statutory management as to blame for South Canterbury Finance’s misfortune.

Monday, August 30th 2010, 10:22PM 3 Comments

by Paul McBeth

"South Canterbury's deterioration in balance sheet were the makings of Mr Hubbard and his senior management team and had nothing to do with the government," Key told reporters at his post-Cabinet press conference. SCF had been in a downward trend for some months, and Key rejected assertions that the statutory management had impacted on the lender's solvency.

Cabinet was briefed on the status of the financier by Finance Minister Bill English, who has put off travel plans to Asia by at least a day in case he has to deal with the fall-out relating to the company.

Prime Minister Key refused to be drawn on whether the government will bail-out the finance company, though he said that the government is not just focused on investors covered under the retail deposit guarantee scheme, but also on the cost to tax-payers and impact on the wider economy.

He said SCF is still an operating company, and the government will not get involved unless the trustee decides not to extend its waiver to the trust deed breach, which expires at the close of business on Aug. 31.

Key said the finance company's net impact on the government under the guarantee would be in the "ball-park of $600 million," making up about two-thirds of the near-$900 million provided for by the Treasury in the government's financial statements.

Even if the government did have to stump up about $1.5 billion under the guarantee, Key said it would not impact on the country's credit rating.

The comments came after the Serious Fraud Office said it will continue its probe into Hubbard's affairs, and extend its investigation into Hubbard Funds Management, the vehicle identified by the statutory manager as a potential problem in its July report.

Statutory managers Richard Simpson and Trevor Thornton, of Grant Thornton, flagged more concerns about Hubbard's Aorangi Securities and HMF in their second report, issued last week, saying the former was too exposed to the dairy sector and the latter was over-valued by at least 25%.

Paul is a staff writer for Good Returns based in Wellington.

Comments from our readers

Commenting is closed