The future of South Canterbury Finance (SCF) hangs in the balance as the company fights to  find new capital and stave off receivership.

The company suspended trading of its securities on Friday pending an announcement, while at the same time Grant Thornton released a damning report on owner Allan Hubbard’s other investment vehicles – Aorangi Securities and Hubbard Management Funds.

Business commentator Bernard Hickey says a failed SCF could spell disaster for South Island dairying.

"There is a risk that the Government falls into the same mistake as other finance company owners have done, to allow SCF more time and allow more moratoriums.

That doesn’t solve the problem – there’s too much debt pumped into newly converted dairy farms in Canterbury and Southland – someone’s going to have to take a hit when those land prices start coming down.”

The Government is considering whether to step in on SCF, which is covered by the Crown Deposit Guarantee Scheme.

Bernard Hickey says the Government should let the company fail.

“My view is that the Government should allow South Canterbury Finance to go into receivership, it’s a failed institution, and they risk throwing more good money after bad.

"Given that it has already guaranteed $1.7b, and has already made a provision for losses of anything up to $700-800m.

"They should call time on SCF, what is essentially a zombie institution."

Federated Farmers president Don Nicolson says a defunct South Canterbury Finance would a be tragedy for the farming sector.

“We need rigour and integrity around every financial system in this country.

"I would have thought after the meltdown of the 80s, I can’t believe that in 2010 we’re seeing the same investigations taking place – I thought we’d sorted all of that out over the last 25 years – I thought we’d tightened those systems up.”