Maier, the head of embattled lender South Canterbury Finance says the government scheme has created the “unintended consequence” of making itself a necessity in giving investors piece of mind to roll-over their deposits as they come due – something that’s become a headache for the Timaru-based finance company.Now isn't that ironic? The largest troubled financial institution in New Zealand, and the most likely large claim on the scheme should things not work out well for them in the next few months, talking about "unintended consequences" of the scheme, in their own reliance on it to refinance something like $1b in maturing obligations. This after they re-lent something like up to $1b between 30 June 2009, when they knew of their own troubles, until 31 Dec 2009.
They could have been collecting cash from their maturing loans and advances, and using it to pay off maturing obligations or investing it in liquid assets so they can use it to do that when required. Instead they have chosen to rely their hoped for acceptance into the scheme extension, and then their ability to roll over funding before the current version expires.
2 comments:
Most likely because if they don't roll over the loans, the borrowers won't be able to refinance anywhere else, so they will then have to mark the assets securing the loan to market value. Probably at a large loss.
Only a matter of time - they are Toast.
Well we don't now how much of their re-lending of cash is to roll over existing loans, although we'd expect this would be a fairly large proportion of it.
Any roll overs that are done on terms more favourable than new loans have to be recorded as restructured assets, which is part of impaired assets.
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