South Canterbury Finance is in receivership after a last-ditch attempt at recapitalisation failed.

The embattled finance company had been working at a rescue package and was understood to be negotiating with several local and overseas investors

Those talks failed, and the company has asked  trustee Trustees Executors to appoint a receiver.

$1.5b of the $1.7 South Canterbury owes depositors and debenture holders is covered by the Government’s Retail Deposit Scheme.

Business commentator Brian Gaynor says the scheme means the Government would always be implicated in the process.

“The Government is already involved, and the big problem with all the other finance companies – Hanover, Bridgecorp – was that the investors lost all their money, and that’s what got all the negative publicity.

"The Government is involved here because it’s guaranteed all the investments by individual investors so they’re going to get their money back.

"The Government is very much involved and the receiver will therefore be answerable to the Government to a large extent.”

Mr Gaynor says the receivership will take pressure off farmers stressing about short term debt repayments

“Under receivership there’s a better chance that it will have less of a negative impact upon the rural community than the current position of the company because obviously the company was trying to collect loans as quickly as possible because it was required to repay investors on the other side.

"But now that the Government is going to meet those obligations the receiver can probably take longer to collect some of those loans that need to be collected and therefore it gives farmers or other people who have loans with South Canterbury more time  to refinance them or to pay them back.”

Rod Oram says the South Canterbury saga casts serious doubt over the regulatory process for finance companies.

“It takes away uncertainty. I think we’re going to hear an awful lot more yet of the negative issues around this because this is a serious failure. Not just of a business but all the regulatory processes that should have been in place. Where were the auditors? Where was the good corporate governance? It was all missing.”