Standard & Poor's has cut South Canterbury Finance's short-term credit rating to C on the back of concerns that statutory management of Allan Hubbard's business interests will likely erode debenture investor confidence.South Canterbury's long term rat
Standard & Poor’s has cut South Canterbury Finance’s short-term credit rating to C on the back of concerns that statutory management of Allan Hubbard’s business interests will likely erode debenture investor confidence.
South Canterbury’s long term rating has also been downgraded from B+ to B- with both ratings now on credit watch negative.
S&P said debenture investor confidence is critical to South Canterbury’s ability to manage its liquidity and its significant debenture reinvestment requirement.
“South Canterbury’s experience of managing forward maturities for the months leading into October 2010 has improved from previous months but will likely be more difficult to maintain from now on,” Standard & Poor’s credit analyst Derryl D’silva said.
“SCF’s ability to raise new debentures could also be at risk.”
The downgrade comes after Mr Hubbard’s personal interests, including Aorangi Securities and seven charitable trusts were placed in statutory management on Sunday.
Mr Hubbard is South Canterbury’s principal shareholder through Southbury Group.
“We are also now concerned that the company’s recapitalisation efforts could be compromised or delayed,” Mr D’silva said.
“In our view, SCF’s recent momentum of improvement in its management of forward maturities and new debenture inflows will materially weaken because of this announcement.
“Additionally, SCF’s cash balance has not increased as rapidly as factored into the previous rating, and there is now greater uncertainty around the support from SCF’s key shareholder.
South Canterbury Finance chief executive Sandy Maier said the government’s appointment of statutory managers in respect of Mr & Mrs Hubbard had created uncertainty for the rating agency.
He reiterated that South Canterbury was excluded from the statutory management order and Treasury had reaffirmed that the extended retail deposit scheme continues to apply to eligible investors.
“For eligible investors, nothing has changed regarding the Crown’s extended retail deposit guarantee scheme which remains in place through to 31 December 2011,” Mr Maier said.
South Canterbury has again pulled its prospectus while it makes necessary amendments.
S&P said it would review its ratings over the next few weeks pending some clarity around investor reaction to the Hubbard news.
The rating could be lowered to the ‘CCC’ category if general debenture investor support were to materially weaken.
