Options narrow for South Canterbury Finance

Philip Bayley
South Canterbury Finance has had its 'BBB-/A-3' long- and short-term credit ratings from S&P placed on CreditWatch with negative implications. This is a result of the financier incurring a NZ$37 million loss in fiscal 2009 after provisioning expenses of NZ$58 million.

S&P also raised concerns about a rating trigger on the financier's US$100 million private placement. The trigger provides for the debt to be reviewed or withdrawn if South Canterbury's credit rating falls below 'BBB-'. Thus a rating downgrade now could result in several more, as liquidity difficulties emerge. Shareholder support is likely to be required to avoid this outcome.

South Canterbury Finance has NZ$475 million of bonds on issue in New Zealand, with maturities ranging from January 2010 to December 2012.