UDC could be sold within a year - S&P

UDC - which has been providing finance for the transport and forestry sectors for 75 years - could be sold within a year, according to S&P.

ANZ-owned finance company UDC Finance could be sold within the year, ratings agency Standard and Poor's said.

S&P said it had lowered its ratings on the 75-year-old company based on its reduced importance to the ANZ group. It also said the ratings remained on creditwatch negative.

"In our view, UDC's strategic importance to its ultimate owner, ANZ, has significantly weakened as we now believe that the finance company may be sold by the parent within one year," S&P said. "Consequently, we no longer equalize our ratings on UDC with those on its parent."

S&P said however that it belived that ANZ would still support UDC in periods of distress.
The agency lowered its long-term issuer credit rating on UDC to A- from AA- and the short-term issuer credit rating to A-2 from A-1+.

"The A-/A-' ratings on UDC remain on CreditWatch with negative implications, reflecting a one-in-two chance that we will lower our ratings on UDC within one year," it said.

S&P said it not longer saw UDC's business an integral part of the ANZ group strategy.

"In addition, we also no longer consider that UDC's business is integrated with the ANZ group to such an extent that it would be improbable to sever the subsidiary from the group," it said.

"In our assessment, we have also taken into account a recent shift in the strategic focus of banking conglomerates in Australia and New Zealand - including the ANZ group - to rationalize their business mix," it said.

S&P noted that ANZ group has had a long-standing history of providing funding support to UDC in the form of a committed credit facility for $800 million.

A high number of UDC customers share other banking relationships with ANZ in New Zealand.

"And as such, we believe incentives exist for the broader group to support the subsidiary during this transition," it said.

UDC Finance has been involved in providing finance for the transport, forestry, agriculture and manufacturing sectors for several decades.

In 1980 ANZ bought 100 per cent of UDC, resulting in UDC Finance becoming a wholly owned subsidiary of ANZ Bank New Zealand.