Baby Steps for South Canterbury Finance and Southbury

How much help is $27m in new capital for South Canterbury Finance? For a troubled company with assets of around $2b it can't be described as anything but a band aid, keeping the show on the road for another few months.



Importantly, it still shows that no one other than the existing owner has been willing to invest ordinary share capital into South Canterbury Finance where it is needed. The new capital is in the form of notes convertible to equity not in South Canterbury Finance, but of Southbury Corporation, which also owns Helicopters NZ and 80% of Scales Corporation. (Alternatively it shows the present owners are unwilling to be diluted).

My expectation of Scales and Helicopters NZ, being the high quality and marketable businesses, being spun off in separate IPOs look to be quite wrong. Hubbard appears to want to keep them together -- its is hard to figure out why!

What is the strategy? Do minimum? Muddle through? Hope for the best?

Without decisive action to recapitalise ($100-200m new ordinary share capital), and clean up the balance sheet (sell the dairy farms, offload related party assets, park the impaired assets with a parent company), the ratings agency will probably not spare them another downgrade, and their future becomes more dependent on luck than planning.