Credit

Oram justifies borrow and spend from Brown

One of the left’s biggest apologists, Rod Oram, has penned?an article which basically forgives and encourages Len to borrow and spend and particularly for his train set and then at the end of the articles we find Oram is on the payroll.

So he gets hired by the ratepayers and the coincidently uses his weekly column to write nice things about his paymaster.

Ratepayers should be asking what this guy is paid and Fairfax should never have accepted the column and asked him to write about something else, in fact Fairfax should get a proper business columnist who actually knows something about business.

The fight is on for the future of Auckland. The choice is: a healthy one driven by ambition, or a dysfunctional one dragged down by a penny-pinching mentality.

The issue has come starkly to a head with the deliberations over the council’s 10-year budget. The decisions the council will make over coming months, guided by public opinion, will set Auckland’s course for years to come.

So far the pessimists have dominated the debate with their wildly inaccurate and irresponsible claims that the council’s finances are shambolic. Only savage budget cuts can save it, they say.

To set the record straight:

The council runs a budget surplus on operating expenses. In 2012/13 it was $246m.

Rates provide only half the revenues for the council’s $3 billion annual budget. The rest come from a variety of sources.? Read more »

That crazy Bernard Hickey

Wow, what a guy.

Fresh from telling anyone who’ll listen that NZ’s biggest problem is its addiction to property, Bernard Hickey is now telling punters to get in quick to borrow against their home.

It seems that Esteemed Bill English (or Wiremu Pakeha as he is known as in Tuhoe) and the Reserve Bank is soliciting feedback on Loan value ratios, or LVRs.

This means that banks may not be able to loan more than a certain amount on a home, maybe 80%. (You will remember in the property boom 5-10 years ago, you could get 105%, because you needed a plasma TV to go with your Grey Lynn villa).? Read more »

Will Labour criticize Len Brown for his negative creditwatch?

Len Brown, he who can’t be trusted with a credit card without “hamming it up”, has now run the Auckland Council into murky waters with his financial management of the city.

With a inner city rail loop he can’t fund without massive rates hikes or monstrous debt, he has now affected the overall creditworthiness of Auckland Council, meaning it could become more expensive to build roads, community halls, parks and more thanks to his loopy rail ideas. (Worsening credit ratings mean it’s more expensive to borrow money)

When central government suffered a credit downgrade, Phil Goff and David Cunliffe were all over the media criticising the government for a financial situation partly inherited from Labour and party inflicted by a global credit crunch.

They even criticised John Key for being unavailable for just over an hour on a radio show, yet Len Brown is absent looking at Chinses tunneling technology to spend ratepayers money on. He’s been gone far longer than John Key was on this issue.

Now that Labour’s loopy rail Mayor is plunging Auckland into a debt crisis of his own volition – it will be very interesting to see what Labour say.

My guess – probably nothing.

Uh-oh Lenny’s loose spending has grabbed attention

Standard and Poor’s are none too pleased with Len Brown’s free spending ways:

Ratings On Auckland Council Placed On Creditwatch Negative, On Increasing Debt Levels

Press Release by Standard and Poors MMS ?at 3:06 pm, 14 Nov 2011

Standard & Poor’s Ratings Services said today that it had placed its ‘AA’ longterm issuer credit rating on New Zealand’s Auckland City Council on CreditWatch with negative implications.

“The rating action follows our discussions with Auckland Council which highlighted their plans to significantly increase capital expenditure, particularly in the area of transport,” said Standard & Poor’s credit analyst Anna Hughes. “At this stage, it is unclear as to how much of this capital expenditure will be funded using debt; however, current revenue and capital-expenditure projections suggest that the council’s debt levels will exceed 170% of operating revenues by fiscal 2013 and reach 200% by fiscal 2015.”

“We expect to resolve the CreditWatch during the next 90 days as the council finalizes its draft 2012 Long Term Plan. Any rating action would not likely exceed one notch.”

ENDS

Of course Len Brown is in China at the moment looking at Chinese tunnel building machinery…he may as well come home now.

Labour living in la-la land

Labour’s funny money figures aren’t stacking up and the public knows.

It simply isn’t?believable?that you can reduce revenue, increase spending and then claim that you will pay back debt sooner.

Anyone knows you can’t borrow money and put it in a savings plan and then pretend you never borrowed that money in the first place…well anyone but Labour.

South Canterbury Finance in receivership

Good.

South Canterbury Finance Limited announced today that it has been unable to complete a recapitalisation and restructure.

As a result, the Company would have been unable to certify to Trustees Executors Limited, in accordance with the terms of its debenture trust deed with Trustees Executors Limited, that it was compliant with various financial covenants under the debenture trust deed for the financial year ended 30 June 2010.

Accordingly, South Canterbury Finance Limited has requested Trustees Executors Limited to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so.

A further announcement will be made by the Company in due course.

Now people will start to realise a few home truths. But let me outline some of them for you.

Solvency is all about liquidity. It all works fine until one part of the system freezes or becomes solid. That just happened. There will be people who will think that everything is fine because SCF was part of the Government’s Retail Deposit Guarantee Scheme. Some of those people are repeaters and should know better. Once one part of the system freezes then so too does the rest slowly.

If people who invested in SCF want their money back it will take time and time is never the friend of people who borrowed short and lent long. Other bankers will now be looking at exposure to their customers and it matters not a jot to them that there is allegedly some money sitting in SCF and allegedly guaranteed.

If SCF lied about their position going into the Retail Deposit Guarantee Scheme, then rest assured those deposits are not covered at all. It will take time, a considerable amount of time to ascertain that position, and for all that time the money in SCF ain’t going anywhere except into the receivers pockets. It certainly won’t be going into the pockets of “investors” who think they are covered by a guarantee. Now that some portions of the liquidity is frozen others will now similarly freeze and farms will start to tip over. This is neither good nor bad, but it is good in the sense that highly leveraged owners will be cleaned out, farm prices will drop making entry of new, better financed farmers more likely.

As far as primary lenders go, usually when they lend they place a “priority” on their security, usually, if they are any good at their job this is the value of the security plus a cushion of 30%. Now what this means is that the first ranked secured creditor gets “dibs on any monies, up to and including their “priority”. Second and third in line get the rest. Now if is the case as is likely in the SCF situation where exposure exceeds value then the second and third placed “secured” creditors will get jack.

And that is irrespective of any so-called guarantee. Banks couldn’t care about that one bit, what they want is their loan money back and in short order, otherwise they will realise the assets….in realising the assets they actually take ownership of the guaranteed funds, and they can afford to wait. The farmer will get squeezed out.

This is actually good. The people who took the risk get most of their money back, the fools get their money taken off them and the farms and cows keep on producing the same as they always have, just the ownership changes hand. I’m glad the government didn’t panic.

Now all I wait for is some poor schmuck to front TV crying about how he lost everything because he “invested” in Blue Chip, Hanover and then SCF, with a little dabble in Strategic Finance, making the trifecta of stupidity. He will probably add to that by calling on Alan Hawkins to come riding in to save SCF.

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