SCF makes the grade despite rating cut

Sandy Maier

South Canterbury Finance says it remains eligible for the Government's extended retail deposit guarantee scheme, despite Standard & Poor's lowering the company's credit rating.

S&P lowered the rating to BB from BB+ and changed the outlook to creditwatch negative from negative outlook, indicating the possibility of a further review, South Canterbury said yesterday.

Chief executive Sandy Maier said the BB rating was the hurdle relevant to its eligibility for the scheme.

"South Canterbury Finance passes cleanly over that hurdle," he said.

The continuation of a BB rating qualified South Canterbury for acceptance into the extended guarantee from October 12, and if it were accepted the company would "transition seamlessly for the benefit of investors".

S&P said liquidity was weaker than many New Zealand non-bank deposit takers in the BB rating category, and any further deterioration would likely result in a lower rating.

However, debenture investors in SCF have remained relatively loyal to the company in recent times, S&P said.

Should debenture investors and other liability stakeholders continue to show relative support for South Canterbury, it was likely S&P would become less concerned about the company's liquidity, which could contribute to the rating being removed from creditwatch negative.

Maier said S&P had noted that the company continued to enjoy strong shareholder support, but had not given the same weight as the company's board to recent positive changes.

Those changes included a new management team, a group restructuring and private placement raising $26.4 million of new equity, an improvement in the liquidity position allowing early repayment of noteholders in a $100 million private placement facility, and a complete review of assets with an additional $180 million of provisions taken.

South Canterbury yesterday had $253 million of shareholders' funds and an equity ratio of 11.8 per cent.

A huge effort has been made to address issues confronting the company, although there were further matters investors and S&P wanted improved, Maier said.

"The board believes we are as well placed as we've been for many months to undertake the work necessary to reposition the company back to its historic long-term position of success .. and we are confident that we will achieve this outcome."

STILL IN

BB+ NEGATIVE OUTLOOK
South Canterbury's old rating.

BB CREDITWATCH NEGATIVE
South Canterbury's new rating. High enough to qualify for extended guarantee scheme, which requires a rating of BB or better.

- NZPA