S&P downgrades Carter Holt as Hart moves in

Standard & Poor's Ratings Services has lowered its ratings on Carter Holt Harvey Ltd (CHH) as New Zealand's richest man Graeme Hart moved a step closer to control of the timber, paper and packaging group.

Mr Hart's Rank Group Investment Ltd declared its takeover bid unconditional yesterday, after last month's acquisition of 50.5 per cent of CHH shares triggered a full takeover bid.

But the move spurred S&P to downgrade CHH's long term ratings to BB from BBB and its short-term ratings to B-3 from A-2 over concerns about the firm's financial situation and future direction.

"The rating downgrade presumes that the Rank Group is funding its offer predominantly with debt, and that the proforma consolidation will substantially weaken CHH's financial profile," S&P said.

"The short-term rating of B-3 factors in significant near-term uncertainty regarding CHH's liquidity and near-term funding requirements."

Its ratings for CHH also remain on credit watch with negative implications reflecting ongoing uncertainties surrounding Rank's future plans for the firm, the international ratings agency said.

On Thursday, CHH's independent directors recommended shareholders reject Rank Group's offer after independent expert Grant Samuel valued its shares at between $2.55 and $2.95 per share.

Earlier this week, CHH issued its second profit warning for the year, stripping around 10 per cent off its previous forecast of $283m for 2005 due to strong exchange rates and poor commodity prices.

- AAP