6. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
Did Treasury evaluate the net effect on South Canterbury Finance’s position of the February 2010 acquisition of Helicopters (NZ) Ltd and Scales Corporation shares, including the effect of the transaction on the recoverability or impairment of South Canterbury Finance’s $75 million loan to its parent company, Southbury Group Ltd?
Hon STEVEN JOYCE (Associate Minister of Finance) Link to this
Yes. In this transaction the assets mentioned were to be acquired by South Canterbury Finance and paid for by the issue of shares. Under the terms of the deed of guarantee, such transactions can proceed where a Crown-approved independent expert provides written certification that the transaction is on arm’s-length terms. In February 2010 South Canterbury Finance approached Treasury about the transaction. Treasury approved separate experts to review each transaction and received favourable responses on 28 February. Treasury’s view of the transaction was that at worst it made no difference to the Crown. It boosted the equity in South Canterbury Finance, but lessened the equity in Southbury by an equal amount. That view has proven to be correct, and I do not believe the cost to taxpayers was impacted by this transaction.
Hon David Cunliffe Link to this
Why did the independent reports provided to Treasury by Simmons Corporate Finance and Northington Partners, certifying that the acquisitions by South Canterbury Finance of Helicopters (NZ) Ltd and Scales Corporation were on arm’s-length terms as stated in South Canterbury Finance’s Prospectus Number 60, not also include an evaluation of the effect on pre-existing loans and exposures to Southbury Group and on South Canterbury Finance’s position as prior-charge secured guarantor of Southbury Corporation’s pre-existing convertible notes?
I can only confirm again that under the terms of the deed of guarantee, such transactions can proceed where a Crown-approved independent expert provides written certification that the transaction is on arm’s-length terms, and that was the basis on which the independent experts were asked to look at the transactions. As I said in my answer to the previous question, Treasury’s view of the transaction was that at the worst it made no difference to the Crown, by boosting the equity in South Canterbury Finance but lessening the equity in Southbury by an equal amount.
Hon David Cunliffe Link to this
In reaching the conclusion that the transaction made “no difference to the Crown”, did Treasury consider whether, after the acquisition, Southbury Group and Southbury Corporation would be in a position to repay their loans to South Canterbury Finance?
Once again I say Treasury was in the position of evaluating its view of the transaction in terms of the exposure of taxpayers, which was its focus throughout this exercise, and it was Treasury’s assessment that the movement of those assets into South Canterbury Finance was at worst neutral, in terms of the exposure that the Crown had under the deposit guarantee scheme.
Mr SPEAKERComments are perhaps unhelpful, but the member is asking a serious set of questions, and it is important that they be heard clearly.
Hon David Cunliffe Link to this
In the event that those loans were not able to be repaid, how could it possibly be that the net impact of that series of transactions was neutral?
When I went to school all of those things had to be assessed on the basis of the balance sheet of the companies. The reality is that Treasury was in the position of having to make recommendations to the Crown, based on its knowledge of the companies and the various loans that the member speaks of. In its view, the movement of those assets would, at worst, have a neutral impact on South Canterbury Finance and its equity, and that is the advice it gave to the Government.
Hon David Cunliffe Link to this
How can both of the Minister’s statements to the House on 15 September be true: first, that a significant proportion of the $831 million provisioning in the 30 June 2009 Crown accounts was related to South Canterbury Finance, and, second, his statement the same day that work done on statutory management and receivership options for South Canterbury Finance “probably did not occur until this year”; and can he therefore clarify to the House when work started on statutory management or recapitalisation options for South Canterbury Finance?
The Treasury assessment of the impairment to the Crown’s accounts that could be caused by the deposit guarantee scheme was in place, as the member knows, in August 2009. I do not have any information to hand that suggests that any of the discussions in relation to statutory management or anything else are different from what the Minister has previously advised the House.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. I fear that the Minister may have inadvertently misled the House, because he has just told—
I accept that the member plans to raise a serious point of order, but he should not preface it in that way. I will listen to the issue of order.
Hon David Cunliffe Link to this
The Minister has just told the House that that provisioning was done in August 2009, but it was in the Crown’s accounts to 30 June 2009. Both statements cannot be correct at the same time.
I appreciate that the member is raising a serious issue, but he cannot litigate the answer by way of a point of order. The member could seek a further supplementary question from his team and question the Minister specifically on that issue. I hear the issue that the member is raising, and he could use another supplementary question to explicitly question the Minister on that.
Hon David Cunliffe Link to this
I seek leave to table Prospectus Number 60 of South Canterbury Finance Ltd dated 20 October 2009, which sets out the relevant background and provisions on the Scales Corporation and Helicopters (NZ) Ltd transactions identified earlier.