It is three years and one day since Danyl wrote this blog post about South Canterbury Finance. I was re-reading it today, and something stuck out like a sore thumb:
December 2008: SCF undertakes a high risk loan strategy, losing an estimated $500 million dollars, the cost of which is borne by the taxpayer. (I would love to know who these loans went to. SCF refused to disclose the nature of the loans, telling journalists who asked about them that they should ‘go to the movies’. I’m guessing they were to PGG related companies or investments.)
January 2009: Cash pours out of SCF in secret loans to its parent and related companies. Treasury is not notified of these transfers which add up to at least $180 million dollars and which puts SCF in clear violation of the Guarantee Scheme. The Reserve Bank wants SCF ‘put on notice’. No action is taken. (I’m assuming that the cash transferred out of the company was that of debenture holders, so not guaranteed by the government.)
Danyl was wondering where those loans went. Well, we know there is a connection between SCF and Dairy Holdings Limited:
SCF’s late chairman, Allan Hubbard, had transferred a 33.6 per cent stake (In Dairy Holdings) to SCF in 2008 in a bid to shore up the company. The stake was said to be worth $75.7 million then but Reserve Bank documents revealed the figure was thought to be inflated.
Hubbard had a very strong connection to the irrigation industry in Canterbury. In April 2010, before the empire came crumbling down, he was given an award for his support of irrigation:
The public face of South Canterbury Finance, Allan Hubbard has been recognised for something completely different – irrigation. Also a director of the Central Plains Water scheme, he “put his money with his passion” and helped fund the project when it needed money, Mr Sutton said.
“If it wasn’t for Allan’s bailout, CPW would not have obtained its consents and be where it is today.”
Dairy Holdings, along with Fonterra, loaned money to CPW. In fact, Dairy Holdings was CPW’s biggest lender:
CPW’s biggest lender, Dairy Holdings, is also part-owned by SCF and many of its shareholder farmers have business ties to the company, although Crombie said its loan was not directly affected.
It’s not like Dairy Holdings was a small operation. This from 2012:
South Canterbury Finance’s (SCF) largest remaining asset, Dairy Holdings, will stay in New Zealand ownership after existing shareholders put in the winning bid of $56.4 million. Dairy Holdings is Fonterra’s biggest supplier and owns 58 dairy farms in Canterbury, Southland and the West Coast, covering 14,200 hectares.
Someone cleverer than me could try and fit this stuff into a timeline like Danyl did. However, this is what we do know:
- the government bailed out South Canterbury Finance to the tune of $1.7 billion dollars
- one of the largest assets that SCF owned was Dairy Holdings, a collection of farms that was Fonterra’s biggest supplier
- Dairy Holdings was also the biggest lender to Central Plains Water, a scheme that wouldn’t have gone ahead if it wasn’t for “Allan’s bailout”
I wonder if any of the high risk loans and secret loans to parent companies from December 2008 and January 2009 went to Dairy Holdings, and if so, whether they went from there to Central Plains. In any case, it doesn’t matter now, as CPW was using the money to try and fight legal objections to the scheme; instead of wasting money on lawyers, they were lucky enough to have a government replace the regional council with irrigation-friendly commissioners.