KEY POINTS:
Geneva Finance's credit rating has been downgraded two notches by Standard & Poor's from B+ to B-.
However the company is negotiating a deal with a big international firm which may see its rating revised up again within a few weeks.
"The rating downgrade reflects our opinion that Geneva's short-term liquidity and funding position is increasingly under pressure," said Standard & Poor's director Gavin Gunning. "There are no new, material, or immediate other concerns reflective in this rating action."
Geneva chief executive Shaun Riley said the rating decision was "extremely disappointing and outside of our control".
"This action is counterproductive to our efforts to prudently manage our business and maintain investor confidence. We are currently in advanced discussions with a strongly rated international funding institution over an equity and debt funding package. However, S&P were not prepared to wait for the outcome, which is only a few weeks away."
Riley said the rating change was a response to market sentiment and the volatile state of the finance sector in general.
Geneva has reduced its lending activity in recent weeks as a reduced investor confidence means most finance companies have seen debenture reinvestment rates and new money inflows fall.
S&P signalled Geneva's B+ rating was in jeopardy last month when it placed the company on "Creditwatch negative".
S&P now has Geneva on "CreditWatch developing".
That reflected S&P's view that: "Geneva's financial strength and consequently its current Standard & Poors rating mainly hinges on the success of negotiations under way between Geneva and its bankers and potential third-party support providers. These negotiations may see Geneva secure a debt and equity support package afforded by strongly rated international financial institutions."
S&P yesterday also lowered Geneva's sister company Quest Insurance Group's rating to CCC+, from B-. Quest was also placed on CreditWatch developing.
