Morningstar threatens BT downgrade

Morningstar says a ratings downgrade is a certainty for BT funds if Westpac buys the business.

Wednesday, June 2nd 1999, 12:00AM

Managed funds research house Morningstar has threatened to downgrade BT Funds Management's Australian product ratings if, as speculation has it, Westpac buys the business.
In a full-broadside attack Morningstar managing director Graham Rich says, "Westpac is known to be unacceptable to BT personnel and a sale to Westpac is therefore likely to cause severe disruption to BT’s style and staffing."
"Once staff receive their bonuses on 4 June and the golden handcuffs are removed, there is every likelihood of a mass exodus of investment staff in a Westpac scenario.

"The disruption would be a disaster for investors," Rich says. "In such circumstances we would have to radically downgrade the qualitative ratings underlying BT’s Morningstar Star Ratings.
Rich says his comments are "not by any means anti-Westpac," nor is Morningstar trying to influence Deutsche Bank.
"It's not a case of trying to influence Deutsche Bank. I don't think that would be possible."
He says merging Westpac and BT would be like "trying to mix oil and water".

However, Rich says there is "no cause for alarm" if the other remaining bidder, US-based Principal Financial Group wins.
While a BT/Westpac merger is not a done deal, Rich says there is enough evidence to show such an outcome will certainly lead to a downgrade.
IPAC Securities general manager David van Schaardenburg says it's no surprise BT staff don't want to come under the control of a bank.
"Given that BT's management has had considerable autonomy and top of the industry compensation packages it's no surprise that they do not wish this to be meddled with."
Rich says his comments relate solely to the Australian businesses of the two operations. WestpacTrust in New Zealand and BT Funds Management (NZ) are two completely different operations compared to Australia, as the former outsources most of its funds management business and the latter does not have the dominate market position, like its Australian counterpart.
Despite that many of the BT funds New Zealanders invest in are managed by BT in Australia.

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