By James Murray
Finance Minister Bill English says the Government is moving swiftly to repay investors, minimise economic damage and reduce taxpayer cost in the light of South Canterbury Finance’s receivership today.
"It’s sad to see a longstanding New Zealand institution in this position," he says. "The Government, like everyone else involved, hoped South Canterbury would be able to work its way through its difficulties, but unfortunately we were advised today that it has been put in receivership.
"As a result of the receivership, the Government is moving swiftly to repay the money owed to South Canterbury depositors under the Crown Retail Deposit Guarantee. We are also taking other steps to reduce the cost to taxpayers and minimise disruption to the wider economy.”
- The Crown has nominated the Trustee as the eligible creditor under the terms of the guarantee and will pay the Trustee $1.6 billion in full today. This will ensure depositors and stockholders are paid promptly without the need to apply to anyone.
- The Crown has made a loan to the Trustee of $175 million, which allows it to repay all of South Canterbury Finance's prior ranking debts.
- Once this transaction is completed it will put the Crown in a position of control, as the first-ranked creditor in the receivership, so we can ensure an orderly and well-managed receivership process.
Commenters on the 3 News website were unhappy that taxpayer money was being used to pay out SCF’s investors.
“Please do not use MY tax dollars. I’d rather it go to new hospitals and fire engines. SCF investors took the risk for that ellusive (sic) extra one percent gain. We shouldn’t be forced to pay for their mistake. John Key and South Islanders – you are on notice,” says Chevy Levy on the 3 News Facebook page.
However, business commentator Bernard Hickey says the Government has made the right decision in not supporting a recapitalisation of South Canterbury Finance.
“Sometimes it pays to take some pain now rather than store up more pain later,” he writes in his NZ Herald blog.
“The Government's decision not to support a recapitalisation plan for South Canterbury Finance was the right one. Receivership was the cleanest, simplest and ultimately safest option for both taxpayers and investors.”
Mr English clearly thinks along similar lines.
"Ensuring all depositors in South Canterbury Finance get their deposits back as quickly as possible will ensure a minimum of disruption to the economy,” he says.
"While this will incur an upfront cost, it will ultimately reduce the cost to taxpayers by about $100 million by ensuring the Crown is not liable for interest payments after the date of settlement.
"Furthermore, being in control of the receivership process takes the pressure off the receiver to quickly sell any assets.
"This ensures the Crown can get the best deal for taxpayers. Businesses that owe money, or are owned by South Canterbury, can continue to operate and there will be a minimum of disruption to both the local and national economy.
"The up front cost to the Crown of repaying South Canterbury's depositors is about $1.6 billion, but we would expect to recover the bulk of that as the receiver sells the assets over time.
"The final expected net cost to the Crown is already provided for in the Crown accounts within the overall provision of about $900 million for all companies covered by the scheme."
3 News