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Bondwatch notes Nationwide's upgrade

Grosvenor has upgraded Nationwide Finance in its Bondwatch rating service, but has taken the unusual step of making it an incremental change.

Thursday, June 29th 2006, 5:29AM

by Philip Macalister

The company has moved from a G6 rating to G5 minus. What is unusual is that Bondwatch’s public ratings don’t normally carry a plus or minus assignation.

Grosvenor chief investment officer David Beattie says that Nationwide has been on the cusp of an upgrade for some time.

Beattie says some advisers set minimum ratings on finance companies when they build portfolios. For instance a rule maybe that all companies used have to rate G5 or higher.

He says it is not unusual to build a little fat into the system, so that a security could be downgraded one notch and still fall inside the minimum rating criteria set.

Beattie says that G5 minus is one notch lower than a straight G5 and that should be known when investors and advisers are putting a portfolio together.

Nationwide chief executive Stephen Wilson welcomed the upgrade, and feels that the company should not have had its previous G6 rating in the first place.

"I am at a loss to explain why they had Nationwide as a G6 previously," he says.

"I remain firmly of the view Nationwide should have been upgraded to a G5 (or better) rather than G5 minus however.

Irrespective, the fact that Grosvenor have upgraded Nationwide in an environment of two recent finance company failures has to been seen as a real positive."

Wilson believes that qualitative factors are as least as important as quantitative ones in a ratings systems.

"You need not look any further than National Finance 2000 and Provincial to see why."

Wilson says Nationwide has a place in any portfolio that is pitched at the more conservative end of the risk spectrum.

"It gives investors exposure to an excellent return commensurate with the relatively low risk profile of the company's activities."

He expects that the upgrade will be positive in terms of its impact on investment flows for Nationwide.

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