2 Sep 2010

Hubbard lost control of lending, says old friend

4:26 pm on 2 September 2010

A long-time friend of Timaru businessman Allan Hubbard says he tried to sound the alarm over reckless lending at South Canterbury Finance - the company placed in receivership on Tuesday.

Receivers are examining South Canterbury Finance's books after the Government gave $1.7 billion to the company on Tuesday to rescue it from collapse.

Dr Albert Makary told Morning Report that Mr Hubbard lost control of lending at the company when he fell ill with cancer.

He says he and Mr Hubbard sought to remove a manager they felt was making irresponsible loans but no one listened.

Dr Makary says Mr Hubbard is now broke after pledging his fortune to support investors.

Meanwhile, Mr Hubbard has asked for privacy in the wake of the collapse. He says the receivership has been deeply distressing for him and his wife, Margaret, and as long as they are in statutory management, their lives are not their own and they feel under siege.

Mr Hubbard says he will make a public comment when his professional advisors have concluded their analysis of the statutory manager's interim report to investors.

The Government placed the Hubbards under statutory management in June, along with seven charitable trusts, Aorangi Securities and, later, Hubbard Management Funds.

Investors expected to be cautious

Finance sector specialists expect former South Canterbury Finance investors to choose traditional options for investing their Government payback.

The 35,000 investors will get their money back under the Government's Retail Deposit Guarantee Scheme.

ANZ chief economist Cameron Bagrie says that while there will be great competition for the investors' funds, given the global uncertainty and the pressure the property market is under, he expects they will be wary and opt for term deposits with banks.

An investment adviser, Jonathan Eriksen, agrees, but says the interest rates on offer - 5% or 6% on term deposits - will be much smaller than the returns investors enjoyed with South Canterbury Finance.