The five US noteholders became entitled to seek immediate repayment of the US$100 million once South Canterbury breached various financial covenants.

SCF says, in a statement to the stock exchange, that it has "reached agreement in principle" on repayment terms with the noteholders.

The agreement provides for the principal to be repaid over the next five and a half months.

The company says is trustee and ratings agency Standard and Poor's, have been briefed on the arrangement and the deal is being finalised. It also says unwinding currency swap hedges on the facility will release cash for South Canterbury Finance.

Once this issue is finalised the company expects to be able to register a new prospectus for the issue of debenture stock and deposits.

The company also intends applying to participate in the extended deposit guarantee scheme announced by the government in August. In order to be accepted into the extended Crown guarantee scheme, the company will need to meet certain eligibility criteria and be accepted for participation by the Secretary to the Treasury.

South Canterbury Finance has cancelled by mutual agreement with its banks the $100 million standby credit facility. This facility was undrawn.

A new credit facility for $75 million with a new third party provider is in the final stages of being arranged and is expected to become effective over the next week.

South Canterbury Finance is continuing to work with its principal shareholder, Southbury Group Limited and its advisors, Forsyth Barr and Harmos Horton Lusk, on a restructuring and recapitalisation programme for the group. This will include the appointment of new independent directors to South Canterbury Finance.