Credit agency backs Toll takeover

By PAUL PANCKHURST

Standard & Poor's, the global credit rating agency that clashed with Tranz Rail in April, says the rail company would benefit from a takeover by Australia's Toll Holdings.

In an article on New Zealand's industrial and infrastructure sectors, S&P publication CreditFocus says Tranz Rail's credit woes were the result of poor debt and liquidity management rather than a fundamental weakness in the underlying business.

"As a monopoly rail freight operator, with integrated trucking and ferry businesses, Tranz Rail under prudent management and a sound strategic direction has the potential to perform well," the publication says.

S&P believed a Toll takeover would be positive for the company because of Toll's experience in transport and logistics.

CreditFocus said that as well as immediate liquidity issues, "Tranz Rail faces a long, hard road to recapture some of its lost customer base, control its cost base and improve its operating margins".

Toll could add "significant value".

Tranz Rail went to the High Court in April but could not stop S&P from publishing a five-notch credit downgrade from BB+ to B-.

Toll's 95c-a-share offer to secure a minimum of 90 per cent of Tranz Rail is open until September 26.