In a report dated March 8, Treasury estimated "it is probable that SCF will default under the existing Crown Guarantee in or around June 2010."

It was then estimating such a default would cost the government nearly $700 million, including interest.

The report was among about 200 government documents relating to SCF released today.

In an update dated May 18, John Park, the guarantee scheme's manager, said while SCF's debenture reinvestment rate had recovered to about 50% following the granting of the extended guarantee, it had deteriorated to 31% by the week ended May 7, 2010.

New money inflows then represented only 20% of the amount needed to cover outflows from maturing deposits.

"Unless deposit rollovers and new inflows dramatically improve, SCR will be reliant on asset sales and loan realisations to avoid failure within the next six to eight weeks," Park said.

An 'aide memoire' Treasury provided finance minister Bill English on May 28 warned: "SCF is about to fail. This will occur within the next six to eight weeks. However, it could occur next week."

At that point, Treasury was expecting the collapse would cost the government $720 million.

SCF finally went into receivership on August 31 last year.

The documents also detail various attempts to rescue SCF. Although the names of many parties involved were withheld, a letter from Treasury to SCF's then managing director dated June 3, 2010 is labelled "Proposed Issue of Secured Bonds to Torchlight," presumably George Kerr's Torchlight Fund. In the letter itself, which discussed a $100 million bond issue, the name of the proposed bond acquired was deleted.

The government now expects the guarantee scheme will cost it about $1.2 billion, mostly due to losses from SCF.