by Jenny Ruth
Genworth provides re-insurance for loans NZF’s subsidiary NZF Mortgages originates using the Westpac facility. Moody’s downgraded Genworth one notch from "Aa3" to "A1" last Friday and said it was on negative watch, signalling a further downgrade is likely.
Genworth also has an "AA" rating from international ratings agency Standard & Poor’s, the equivalent of Moody’s "Aa2" rating and two notches higher than Moody’s current rating, which was reaffirmed in December.
A condition of the Westpac facility was that Genworth retain a Moody’s rating at or above "Aa3" and an S&P rating at or above "AA-". Westpac has now waived that requirement for 60 days.
"The downgrade was a technical breach of the facility," says NZF Group managing director John Callaghan. "If Westpac wanted to, it could have pulled our facility and stopped us lending. They’re obviously very happy with the relationship," he says.
The facility was to have been reviewed from October 18 and NZF had already started the review process but Genworth’s downgrade had brought that review forward, he says.
Genworth also re-insures loans for wholesale facilities Westpac has provided similar organisations in Australia which are now also under review as a result of the Moody’s downgrade.
NZF first arranged a $100 million facility with Westpac in September 2005 to diversify its source of finance and lessen its dependence on debenture funding. It had increased the facility to $200 million by December 2007. It also has a $40 million line of credit from Commonwealth Bank of Australia.
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