Marac scores investment-grade rating

Marac Finance Ltd has become the country's first non-bank lender to receive an "investment grade" rating from international credit rating agency Standard & Poor's.

S&P assigned its 'BBB-' long term and 'A-3' short term counterparty credit ratings to Marac. That put it on the bottom rung of investment grade ratings, which ranged from "extremely strong" to "adequate".

The rating increased Marac's ability to raise money by attracting new investors, like institutions and trustees, who required an investment grade before investing.

Marac, a wholly-owned subsidiary of Christchurch-based financial services firm Pyne Gould Corp, has a $1 billion loan book, making it one of the largest finance companies in New Zealand.

It provides funding for plant and equipment, motor vehicles and property -- generally operating at the low-risk end of an increasingly crowded local finance market.

S&P credit analyst Craig Bennett said the rating reflected the quality of Marac's lending portfolio, supported by a good market position and experienced management team.

He warned that a move into higher-risk lines of business could influence future ratings.

S&P expected competition in the finance market to intensify in the coming year. General business conditions were also expected to get tougher, increasing the risk of loan defaults.

"We believe Marac is well placed to maintain its business and earnings profile by continued focus on asset quality and liquidity management," Mr Bennett said.

Marac managing director Brian Jolliffe said the rating was a "significant achievement" and set a new benchmark for local finance companies.

He hoped the rating, which Marac had sought out, would spark an industry-wide move towards greater transparency.

Marac posted an operating profit of $11.4 million in the six months to December 31, up 8 per cent on the same period a year earlier.

The standout performer was Marac's commercial division, which finances plant and equipment for New Zealand businesses.

The division recorded finance receivable growth of 13 per cent following a decision to invest in regions outside its traditional business.

Shares in PGC bounced 5c, or a little over 1 per cent, to $4.25 on the news.

- NZPA