Council faces post earthquake rating cut

Standard & Poor's Ratings Services is today signalling a possible downgrade of Christchurch City Council's credit rating in the wake of Saturday's earthquake.

The credit rating company has placed its AA plus credit rating on Christchurch City Council and subsidiary Christchurch City Holdings Ltd on credit watch with negative implications.

It said any rating action would not likely exceed one notch downward.

"We are monitoring developments in Christchurch to gauge the situation faced by the council as well as its holdings company in dealing with the effects of the earthquake on their assets and operations.

"We have previously noted that Christchurch City's debt levels are high for the current rating and approaching levels that could lead us to reassess the rating."

There has been widespread damage to infrastructure assets, although much of it is likely to be insured.

"There may also be secondary effects on the council, as the council not only replaces infrastructure but also participates in the rebuilding of the local community's assets."

The credit rating company expects to resolve the creditwatch during the next 90 days.

Christchurch today continues to deal with the practical and emotional consequences of Saturday's magnitude 7.1 earthquake, with teams assessing building damage and care services supporting those affected.

Separately S&P said the rating of Christchurch International Airport Ltd (CIAL) is not affected.

CIAL has advised S&P that the airport's operations have been largely unaffected by the earthquake and that it will seek reimbursement via insurance to complete repair work.

"In our view, the airport's liquidity is adequate," S&P said.

"We believe downward pressure on the rating may emerge, however, if there were substantial and prolonged negative implications from the earthquake on the airport's passenger traffic, if cash flows were materially affected by repair works, or if the airport's operations were negatively affected."

CIAL's has an A minus long-term credit rating. It is 75 per cent owned by Christchurch City Council.

The airport's rating is likely to be lowered if the ratings on Christchurch City are lowered to below AA, but S&P said it did not expect this scenario to occur.

- NZPA