By Duncan Garner
The Government is paying $1.6 billion to bail out investors in South Canterbury Finance – now in receivership.
While the move will be welcomed by investors, businessman Allan Hubbard is furious.
He says he could have saved the company if he hadn’t been put in statutory management.
Under measures announced today
- The Government is paying out $1.6 billion, investors should get the money within the month
- The Government is also lending $175 million to SCF
- That loan will give the crown sole interest in the receivership – it will have first call on the assets of the failed company and hopes to be able to claw back $1 billion over the next few years.
When Mr Hubbard was in control of the billion-dollar financial empire, locals said he was too big to fail.
But today he crashed and the receivers came in.
The Government has used taxpayer money to pay out $1.6 billion to 35,000 investors.
They will get their deposits back in full, plus interest, within a month.
“All South Canterbury depositors will have their money repaid,” Finance Minister Bill English said today.
He appeared angry as he pleaded with those in the South to show some gratitude to taxpayers.
“I would hope that the depositors of South Canterbury and those who are supporting the company are grateful for the support of the New Zealand taxpayer because, without that support, Timaru and South Canterbury could have ended up $600 million out of pocket,” he said.
“I would expect to hear a bit more from that community about the support of that business.”
The Government expects to recoup about $1 billion through the slow sale of SCF’s assets over the next three to four years.
But at 3 News reported last night, it will still cost taxpayers around $600 million.
“We agree it could be much better if we had this $5 million or $6 million available for schools or hospitals or better public services but the promise was made the depositors in 2008 to prevent them from pulling the financial system down,” Mr English said.
The Government has also loaned another $175 million to SCF so it can repay other debts.
That means the Government effectively controls receivership and is the sole beneficiary of South Canterbury’s assets once they’re sold.
“The receiver is the proud owner of them and I’m a close advisor to him,” says Mr English.
The Government has also bent the rules of the retail deposit scheme, by paying out some foreign investors that wouldn’t have normally been eligible – about $20 million dollars.
Prime Minister John Key says that had to happen so the Government could control the process.
This is the largest bailout of a finance company to date. Ordinary hardworking taxpayers have put their hands in their pockets to make sure South Canterbury’s investors aren’t out of pocket.
3 News