South Canterbury Finance (SCF) is considering “innovative” ways to widen its investor base.

During a time of global finance sector tumult, the Timaru finance company is selling bonds to the United States private placement market.

But the finance company was not dropping its focus on raising funds from New Zealand-based investors in its traditional debenture stock, chief executive Lachie McLeod said yesterday.

The finance company - with about $1.64 billion in total assets - was getting about 72 per cent of its investors rolling over their money into new investment, McLeod said.

Questions have been asked of how far the finance company sector will recover following investment woes over the last 18 months. Some finance companies are getting much lower reinvestment rates.

About $2 billion of investors’ money has been affected, as more than a dozen companies have gone under during that period.

But despite the most recent problems at MFS Pacific Finance (which has frozen investors’ funds) the finance company sector had settled somewhat, McLeod said.

The company now had four or five options in terms of raising funds, which are then lent out to clients needing loan facilities, he said.

“We are just looking at certain other options down the track for a long-term strategy … and one is the US private placement (market).

“(But) our debenture book is still very key and critical for us, and it’s been fantastic for us for 80-odd years so that is our key market.”

SCF had also diversified into secured bonds with a $125m issue last year, and a $150m bank facility.

“All we’re doing is looking at different ways for the next two to three to five years to diversify our funding base.

“Look, we haven’t achieved anything with the US yet, it’s just a discussion paper.”

The paper had been prepared by NabCapital, a division of Australian-based National Australia Bank (NAB). SCF’s main banker is BNZ, a subsidiary of NAB.

“We’re receptive to their thoughts on it, and there may be some real options out there, but we’re certainly just looking through it at the moment,” McLeod added.

The US private placement market might look on investing in SCF favourably given problems in the US subprime market, where defaults on mortgages had fed through to the wider investment sector.

“We think they might like us at the moment because we’ve got a triple-B (Standard & Poor’s) rating, we’re not involved in the subprime, and we’re a first grade country.

So we’re being a little bit innovative, I suppose,” he said. The “BBB-” credit rating is investment grade.

Any risk associated with currency volatility would be covered by hedging or swap mechanisms, he added.

Despite further New Zealand finance company sector unrest SCF was confident the sector would settle down in about six months time, McLeod said.

Eventually these finance companies would offer more attractive rates to investors than the banks, given the gap between the two had closed over the recent period.

SCF, part-owned by Timaru Rich List fellow Allan Hubbard, is due to report a financial result later this month.