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Geneva annoyed at S&P's rating action

Standard and Poor's has downgraded its rating for Geneva Finance, as signalled, from B+ to B- at a time when the company is in talks with a major funder.

Thursday, October 11th 2007, 7:21AM
The move has annoyed Geneva chief executive Shaun Riley, who has described it as "extremely disappointing" and "counterproductive to our efforts to prudently manage our business and maintain investor confidence."

He says Geneva is "in advanced discussions with a strongly rated international funding institution over an equity and debt funding package."

"However S & P were not prepared to wait for the outcome, which is only a few weeks away."

Last month S&P put Geneva on "credit watch " indicating that it may downgrade the company because of changes in the market and funding pressures. It also noted that Geneva's wholesale funding line from Bank of Scotland was important. Yesterday it said that "Geneva continues to benefit from the demonstrable support of its primary bankers."

However it went on to say "the nature and extent of potential future support has changed since Standard & Poor's previous rating action", referring to the Geneva's talks with an unnamed international funding institution.

"Retention of banker confidence, in accordance with Standard & Poor's understanding of the type and nature of current and potential future support, was critical to alleviating our concerns regarding Geneva's short-term liquidity position and to stability in ratings at previous levels. Nonetheless, Geneva continues to work closely with bankers and potential third-party support providers in devising a liquidity and funding package that can meet short-term liquidity needs."

Currently S&P has Geneva on CreditWatch Developing, indicating the rating could go either way depending on the outcomes with the talks.

"The CreditWatch placement indicates that the Geneva rating could be raised to, or near, previous rating levels if Geneva successfully negotiates a robust liquidity and funding support package. Equally, however, a lack of success in securing meaningful liquidity support is likely to result in the rating being lowered further."

Gunning says S&P's "primary concerns regarding Geneva's financial strength continue to be confined to matters concerning liquidity and funding. It should be noted that there are no new, material, or immediate other concerns reflective in this rating action. Resolution of the CreditWatch is likely to occur within one month."

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