Credit rating action was very light last week. Moody's Investor Service affirmed the 'Aaa' long-term rating it assigns to the State of New South Wales. This was in response to the withdrawal of legislation that would have enabled the sale of some of the state's electricity assets and follows Standard & Poor's affirmation of a week earlier.
Unlike S&P, Moody's left the rating outlook at stable and noted that it expects the state will offset some of the lost revenue through a sound policy response that could include a re-prioritisation of capital projects and a variety of cost saving measures. These measures are expected to be announced in an upcoming mini-budget.
Moody's went on to note, though, the state's formidable capital expenditure program will add to its debt burden over the medium term and the increased spending will take place in a challenging fiscal environment. A budgetary stance protecting financial margins to ensure the debt burden remains manageable will be of key importance.
Moody's also completed its review of Australian RMBS supported by lenders' mortgage insurance provided by PMI Mortgage Insurance Ltd (PMI Australia). The ratings on 17 senior and six mezzanine tranches were affirmed and removed from review for possible downgrade. However, 84 tranches of junior notes remain on review for possible downgrade.
The review took into account current levels of credit protection and other structural features afforded the tranches. PMI Australia's insurance financial strength rating of Aa3 remains on review for possible downgrade.
Finally, Fitch Ratings has withdrawn the ratings assigned to the Syncora group, including the 'CCC' insurer financial strength rating assigned to Syncora Guarantee Inc. (formerly XL Capital Assurance Inc.). Fitch noted that with Syncora's financial guarantee franchise effectively in run-off there is greatly reduced investor interest in continuing rating coverage. Moreover, Syncora will no longer be providing Fitch with non-public information required to maintain the ratings.