By Andrew Patterson

Bailing out South Canterbury Finance might be a good political option but it’s a bad financial one.

There’s now plenty of evidence to prove that bail outs, work outs, moratoriums, restructures - call them what you will - just don’t work; despite all the best intentions and the appealing prospect that more time will solve the problem. The fact is, it won’t.

Once the patient is all but clinically dead – as South Canterbury is right now – there is nothing to be achieved by putting it on permanent life support.

And that’s what will occur if the bail out option is pursued.

Taxpayer money shouldn’t be used for picking favourites.

Cover the depositors, as agreed by the guarantee and move on. (There are many that would argue even that guarantee should never have been put in place.)

South Canterbury’s earlier success was based around the cult of personality that Allan Hubbard attracted. Without him, the finance company has almost zero prospect of being able to revive itself.

In fact, its brand and credibility has been so severely damaged by the events of the last few months that it’s highly questionable whether the business could even get back on its feet again.

The independent finance company model in this country is now permanently broken. Without a significant parent and ready access to capital, the days of taking in money from mum and dad investors and then lending those funds out to a range of borrowers is well and truly over.

Aside from all of this, if the company was somehow to survive, what sort of business environment will it face in the future?

Certainly not one that is going to be conducive to finding businesses, property developers or farmers willing to take on more debt or having depositors keen to place their money with a finance company that has had its reputation literally shredded.

It’s time to put the patient out of its misery and move on.

De-leveraging is a slow and painful business. Three years into the Great Recession the pain doesn’t get any easier. But applying pain killers for short term relief is not the answer.