23 Mar 2010

SCF looks at possibility of raising more money

5:54 pm on 23 March 2010

South Canterbury Finance says it may need to raise more capital or sell non-core assets to ensure it complies with new financial rules regarding capital requirements.

The Reserve Bank is proposing that non-bank financial institutions, such as South Canterbury, must have a capital adequacy ratio of at least 8%.

Analysts estimate the company may need to raise anywhere between $100 million and $400 million to comply with the new rules.

In a letter to investors, chairman Allan Hubbard acknowledges that company's recent financial performance has been disappointing, but says he is confident about the finance firm's future.

Mr Hubbard says the company has taken all the steps necessary to meet the eligibility criteria for the Government's extended retail deposit guarantee scheme, and he is confident its application will be approved shortly.

He says the recent transaction in which he transferred $152 million worth of assets from his personal investment vehicle Southbury Corporation into the company has helped to shore up its balance sheet.

However, he says the company may have to raise further capital, and possibly sell non-core assets, to ensure it complies with the new regulatory environment.