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Geneva Finance credit rating downgraded

Standard & Poor's has cut Geneva Finance's credit rating, warning that it faces receivership if investors reject a debt-for-equity swap.

Niko Kloeten
Fri, 18 Mar 2011

A ratings agency has downgraded personal loan and car financier Geneva Finance’s credit rating, warning that it is likely to be forced into receivership if investors reject a debt-for-equity swap.

Standard & Poor's Ratings Services said today that it has lowered its long-term counterparty credit rating on New Zealand finance company Geneva Finance to 'CC' from 'CCC' and placed its rating on Geneva on CreditWatch with negative implications.

At the same time, Standard & Poor's lowered its insurer financial strength rating on Geneva's captive insurer, Quest Insurance Group Ltd., to 'CC' from 'CCC' and placed Quest's rating on CreditWatch with developing implications.

“The rating action follows Geneva's announcement that it will seek subordinated noteholder approval to convert existing debt interests to equity,” Standard & Poor's credit analyst Peter Sikora said.

Mr Sikora said the CreditWatch placement reflects Standard & Poor's view that there is a high likelihood that the Geneva's subordinated noteholders will agree to a debt-for-equity exchange at a level less than par, which would result in the ratings on Geneva being lowered to 'SD' when the exchange is completed in April 2011.

After the exchange is completed, it is likely that the rating on Geneva and Quest would be raised to a level no higher than a 'CCC' rating category following further review of the group, he said.

Standard & Poor's view is that should investors and shareholders reject the plan, there is a high chance of Geneva being forced into receivership.

Accordingly, the 'CC' rating on Geneva would remain on CreditWatch with negative implications and transition to 'D' when the company is formally placed in receivership.

The 'CC' rating on Quest would also remain on CreditWatch but the direction revised to negative, Mr Sikora said.

Geneva issued a stock exchange announcement today saying its directors are not aware of any information that should be disclosed that had not already been disclosed. 

Niko Kloeten
Fri, 18 Mar 2011
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Geneva Finance credit rating downgraded