Finance company NZF Money expects to lose half of its retail debenture support after failing to qualify for the Government's extended retail deposit guarantee scheme, but views that as manageable.Finance companies with liabilities of more than $20 million
Finance company NZF Money expects to lose half of its retail debenture support after failing to qualify for the Government's extended retail deposit guarantee scheme, but views that as manageable.
Finance companies with liabilities of more than $20 million have to gain a credit rating of BB or above to qualify for the guarantee, which rolls over in October, before an expected phase-out by the end of next year, but NZF Money received only a B rating.
NZF Money is a subsidiary of NZX-listed NZF Group, whose managing director John Callaghan said the rating had come in where the company had expected it to, media reported today.
Debenture investment was only part of NZF Money's business model with only 23 percent of its funding coming from mum and dad investors, Mr Callaghan said.
He predicted the company's debenture funding could halve but said that as a percentage of the whole group that was not an unmanageable amount.
The company was addressing its capitalisation issues and had taken on a specialist financial services consultant to work through the options, Mr Callaghan said.
Finance companies need a credit rating before a March 1 deadline set by the Government. So far only Avanti Finance, Asset Finance and now NZF Money (formerly New Zealand Finance) have missed out on qualifying.
In its ratings announcement yesterday, Standard&Poor's said the ratings on NZF Money reflected the company's status as a wholly-owned subsidiary of a weakly capitalised parent.
The rating also recognised vulnerability potentially affecting NZF Money's liquidity in the next 12 months, and some large lending exposures relative to size, S&P credit analyst Gavin Gunning said.
Favourable features of NZF Money's credit profile included its moderate loan quality and profitability, by domestic standards.
Its main focus was on first mortgage property lending and, while its non-performing assets and credit costs had increased, NZF Money had managed a recent period of difficult operating conditions better than most New Zealand finance companies specialising in property lending.
