The Government is stealing our money when bailing out South Canterbury Finance

South Canterbury Finance – they really are not our responsibility you know and the Government is stealing our money when bailing them or any other finance company out.

I believe we really are not placing the responsibility for the failure of finance companies in the right place at all, apart from incompetent management that is.

After all we as taxpayers as well as investors are entitled to rely on the conditions and compliance with the requirements of any Trust Deed, set up I understand under an Act of Parliament and which borrowing by any financial institution has to have.

As a pensioner receiving $300 per week I am a bit miffed about all of this, when if the people responsible for Trust Deed compliance had been doing their job properly and who I believe have been very negligent, it should not have happened.

No government guarantees or bailouts required!

If the Trustee companies had seriously applied their responsibilities under the various Trust deeds then there would have been no need for a government guarantee at all and in the case of SCF the bail out for an enormous amount of money.

Just to follow my thinking as there is always some bright spark with a critique; all borrowing under debenture borrowing has to comply with a Deed of Trust, which includes a Trustee usually with substantial assets including insurance against claims against their trusteeship, in accordance with an Act of Parliament which sets out financial ratios to be strictly followed. The bigger companies like SCF usually appoint a Trustee company similar to Trustees Executors as indeed in the case of SCF.

My thoughts on SOUTH CANTERBURY FINANCE are that I believe there has to be considerable doubt as to who should be held accountable for the situation that SCF found itself and where the tax payer has had to support to an unbelievable amount of money $1.6B

Trustees Executors bank with the National Bank I believe; so we have passed $1.6B to an Australian owned bank to look after while its is all sorted out!!!

I was very surprised to read that the company had been allowed to go into breach of its debenture trust deed in February 2010.

As a previous Wellington Branch Manager of Trustees Executors “know that a breach of this magnitude does not happen overnight and must have been building up for many months if not years previously with the knowledge of quite a few people”

Both the debenture holders, shareholders and other stakeholders who include Allan Hubbard and his wife are entitled to rely on TEA to manage the security on their behalf and in compliance with the Trust Deed.

The Trust Deed will set out several financial ratios’ that have to be controlled and applied and it is the responsibility of Management, Auditing Accountants and the Trustee to ensure compliance.

In particular Management has to report to the Trustee immediately any serious variation in a financial ratio, say when a serious decline in asset value against borrowing happens and that would seriously affect the debenture holder’s value of their investment in the company.

A true assessment of loan values and potential bad loans for instance; $245M in bad loans does not happen overnight!

The Trustee is in this case (TEA) will be supported by local board members with local knowledge on values TEA, Timaru Branch, whose manager will sign off the annual certificate of compliance.

After all the Trustee makes a significant charge for the service and the debenture holders, banks, shareholders and other stakeholders’ are entitled to place absolute confidence in the certificate of compliance and the application of all conditions drawn on SCF under the Trust Deed.

Especially the ratio of an annual valuation of assets held to borrowings. This would include estimates for bad loans or debatable valuations, which would all be taken into account in the final valuation and ratio calculation.

Its not rocket science to calculate the figures for this! And as I have said previously this would not happen overnight but major breaches have probably been going on for a long, long time

So perhaps we the tax payers and the people of South Canterbury who I am sure are feeling considerable embarrassment about all of this should be looking elsewhere for the responsibility for the collapse of the company.

Which in my view and belief, would include SCF management, the Trustee, auditing accountants and their insurers; (including Lawyers who are also party to the certificate of compliance if I remember correctly; they have a lot of money in the fidelity fund) because again in my view the tax payer should not need to or be fronting up with the money to support this company or any other financial institution at this time.

I as a poor tax payer can’t afford it!