Govt moves swiftly to repay all South Canterbury depositors

The Government is taking steps to swiftly repay investors, reduce the cost to taxpayers and ensure minimal disruption to the wider economy following the receivership of South Canterbury Finance, Finance Minister Bill English says.

Tuesday, 31 August 2010

"It's sad to see a longstanding New Zealand institution in this position. 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," Mr English says.

"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.

Steps the Government has taken include:

• 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 will today make a loan to the receiver 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.

"Ensuring all depositors in South Canterbury Finance get their deposits back as quickly as possible will ensure a minimum of disruption to the economy.

"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," Mr English says.

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