Standard & Poor's has lowered its long-term rating on Geneva Finance after the finance company negotiated an extension of funding from an Australian finance company.Geneva, and its captive insurance group Quest Insurance Group, have had their ratings
Standard & Poor's has lowered its long-term rating on Geneva Finance after the finance company negotiated an extension of funding from an Australian finance company.
Geneva, and its captive insurance group Quest Insurance Group, have had their ratings have dropped to CC from CCC. Both have also been placed on CreditWatch with negative implications.
The downgrade follows Geneva's announcement that it has negotiated an extension of its funding facility from BOS International (Australia), which S&P believed would result in a partial deferment of principal debenture repayments on March 31, said credit analyst Derryl D'silva.
Under the revised agreement, the company has proposed that debenture and subordinated note investors defer about 50% of their currently scheduled principal repayments, which S&P viewed as a selective default.
Geneva will, however, continue to pay interest each month at the individual investor contracted interest rate.
"The company has expressed the view that its proposed course of action is the best way for the company to achieve an orderly repayment of its banking facility, due in April 2011, and is in the best long-term interests of debenture and subordinated note holders," Mr D'silva said.
"While this may or may not prove to be the case, it is likely nonetheless to cause a selective default on existing obligations in the short term."
The CreditWatch placement reflected S&P's view that the next key milestone requiring a review of Geneva and Quest was likely to be after debenture and subordinate note holders have considered the revised arrangement, in the last week of March 2010.
