Investor support lifts South Canterbury Finance

Investor support lifts South Canterbury Finance

New South Canterbury Finance Limited Chief Executive Officer Sandy Maier has carried out a thorough review of the business and is confident the Company can meet current and future challenges.

The business of South Canterbury Finance is cash-flow positive and retains the confidence of its investors, financial intermediaries and its shareholder.

During January, historically a quiet month for the Company in terms of investor activity, South Canterbury Finance experienced an encouraging inflow of funds from investors. The Company has averaged in excess of $1.7 million of new investment money per day for January and its retention rate of existing investors lifted to more traditional levels.

South Canterbury Finance believes that this renewed confidence from its investors, and its large network of financial intermediaries, is due to a number of positive changes in recent months. These include, during December 2009, the successful capital raising by its parent company, Southbury Corporation Limited; the confirmation of the Company’s BB+/Negative outlook rating by Standard & Poor’s and its removal from CreditWatch Negative; and the appointment of Sandy Maier as Chief Executive Officer.

On 21 January 2010, South Canterbury Finance filed an application to participate in the Extended Crown Retail Deposit Guarantee scheme. The extended scheme commences on 12 October 2010, the expiry date of the current deposit guarantee scheme, and will provide eligible investors with a Crown guarantee on qualifying investments until 31 December 2011. If it is accepted into the extended scheme, South Canterbury Finance will be able to offer a greater range of investment options to investors.

South Canterbury Finance will announce its preliminary financial results for the six months to 31 December 2009 in coming weeks. It is now clear that further provisioning will be required in respect of assets previously identified as impaired. As well as fairly representing the Company's current view of the value of these assets, the further provisioning will ensure, as far as possible, that the Company’s results for future periods are not distorted. In addition, the early redemption of derivative instruments associated with the United States Private Placement facility and the impact of fair value adjustments on investments will have a negative impact on South Canterbury Finance’s results for the half year.

As part of the half year accounts preparation, it has come to the Company’s attention that adjustments may be required to the valuation and reporting of certain items in the 30 June 2009 audited financial statements. The Company also recently became aware that the valuation used at 30 June 2009 for its preference share investment in South Island Farm Holdings Limited (SIFHL) should have been recorded at fair value rather than cost, under the applicable financial reporting standard. An independent valuation of the SIFHL preference shares at the date of their acquisition is currently being undertaken. It is noted that any difference in value arising will be reversed in the current financial year as the preference shares have since been redeemed for their issue price. The Company is currently reviewing the extent of potential prior period adjustments and at this stage believes that they may not have a material impact on the current position of the Company.

All the matters referred to above are being worked through with the Company’s new auditors and further information will be provided once the Company’s preliminary results are available. As a result of the further impairments and adjustments the Company anticipates it will report a loss for the six months to 31 December 2009.

Chief Executive Sandy Maier says: “The results for the first six months of the year will not be representative of the historical achievements of the Company’s business nor of the strength of its future performance.”

In a further development, the investment bank Forsyth Barr has been mandated to source funding to strengthen the balance sheet of South Canterbury Finance. Further announcements in this regard will be made by the Company when it is in a position to do so.

ENDS

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