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S&P watching Christchurch events

Standard & Poor's Ratings Services says it is too early to assess the overall effect on the nation's economy.“While we expect an immediate hit to economic growth, extensive reconstruction efforts are likely to bolster economic activity thereafte

Chris Hutching
Thu, 09 Sep 2010

Standard & Poor’s Ratings Services says it is too early to assess the overall effect on the nation’s economy.

“While we expect an immediate hit to economic growth, extensive reconstruction efforts are likely to bolster economic activity thereafter. There is likely to be a negative impact on government finances but we believe that the Crown’s very low debt burden [a ratio of central government net debt to GDP of about 14% in 2010] provides it with some room to absorb increased spending on reconstruction.

“We cannot fully determine the impact of the earthquake on asset quality at this stage but we believe that the nation’s banks are adequately provisioned and capitalised to face some deterioration in their loan portfolios.

“The earthquake damage is localised and we believe the impact on creditworthiness on rated corporates will be small and largely offset by insurance. Specifically, we believe that there will be no immediate impact on Christchurch International Airport ‘A-’ rating.

‘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.

“We expect to resolve the CreditWatch during the next 90 days as more-accurate information becomes available ... Any rating action would not likely exceed one notch downward.

Chris Hutching
Thu, 09 Sep 2010
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S&P watching Christchurch events
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