S&P signals possible cut of Christchurch's rating
Standard&Poor's Ratings Services is today signalling a possible downgrade of Christchurch City Council's credit rating in the wake of Saturday's earthquake.
The credit rating company has placed its AA plus credit rating on Christchurch City Council and subsidiary Christchurch City Holdings Ltd on credit watch with negative implications.
It said any rating action would not likely exceed one notch downward.
"We are monitoring developments in Christchurch to gauge the situation faced by the council as well as its holdings company in dealing with the effects of the earthquake on their assets and operations.
"We have previously noted that Christchurch City's debt levels are high for the current rating and approaching levels that could lead us to reassess the rating."
There has been widespread damage to infrastructure assets, although much of it is likely to be insured.
"There may also be secondary effects on the council, as the council not only replaces infrastructure but also participates in the rebuilding of the local community's assets."
The credit rating company expects to resolve the creditwatch during the next 90 days.
Christchurch today continues to deal with the practical and emotional consequences of Saturday's magnitude 7.1 earthquake, with teams assessing building damage and care services supporting those affected. Separately S&P said the rating of Christchurch International Airport Ltd (CIAL) is not affected.
CIAL has advised S&P that the airport's operations have been largely unaffected by the earthquake and that it will seek reimbursement via insurance to complete repair work.
"In our view, the airport's liquidity is adequate," S&P said.
"We believe downward pressure on the rating may emerge, however, if there were substantial and prolonged negative implications from the earthquake on the airport's passenger traffic, if cash flows were materially affected by repair works, or if the airport's operations were negatively affected."
CIAL's has an A minus long-term credit rating. It is 75% owned by Christchurch City Council.
The airport's rating is likely to be lowered if the ratings on Christchurch City are lowered to below AA, but S&P said it did not expect this scenario to occur.
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Comments and questions6
Talk about kicking a dog when it is down. These S & P guys seem to have no heart. Why jump in a day or so after a major catastrophe. Notice how slow they were to act with SCF. What gets into the head of these people?Maybe S & P could do the right thing and make a donation to the city - do something positive for a change.
Aren't these the boys that are getting sued big time in the USA over the Credit deratives debarcle and the quality of their ratings work???
Things never change 18 months on and they are now back giving rating advice as if nothing happened.
Yep, and the worse thing is people are believing what ratings these turkeys are giving
I can only but agree with the commnets thus far. Clearly they either have no other work to do or are so far up themselves that a sneeze could signal the end.
How about a 'rating' that said - Christchurch city council deployed well though out emergency plan and saw to the safety and welfare of it's guests and citizens. In our opinion this city has proved a resiliance against natural disater and would be a GOOD place to invest in.
Who cares - do your own investment research never rely on someone else to do it for you!!
These morons caused the credit crisis and can not be trusted again.
Christchurch is just about to receive a massive stimulus package from Australian Insurers. Sounds like a great time to back Christchurch.
All S&P have done here is highlight how poor their understanding of the Local Authority sector is.
They did need to review the rating because there ratings are supposedly 'good' evry day of the year.... but I simply dont see the justification for the downgrade.
As per points above, the EQC and reinsurers pick up the bill.... and with the prospect of rebuild infrastructure assets over the coming months/years I fail to understand the rationale.
In the meantime, poor old Christchurch City have to cancel a planned Commercial Paper tender.... I would say in large part to S&P idiocy.
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