Equitable says downgrade has no impact
Equitable is the latest non-bank deposit taker to have its credit rating downgraded by Standard and Poors.
Tuesday, August 24th 2010, 3:34PM
Equitable Mortgages has been downgraded to BB- over its "poor asset quality" and inability to deal with late repayments.
S&P cut the financier's rating one notch, saying its arrears are above its level of comfort for a BB rating, along with a softer commercial property market, a lack of financing alternatives, and low property investor confidence, all adding to repayment pressures.
The rating has a negative outlook.
"The ratings action reflects Equitable's poor asset quality and its failure to resolve arrears as promptly as we anticipated," credit analyst Mark Legge said.
"This has undermined earnings performance and put some pressure on liquidity."
Equitable says S&P's rating announcements on Friday were an "industry wide move".
In March, Equitable was accepted into the government's extended retail deposit guarantee earlier this year when it had the required BB rating. Only four non-bank deposit takers have been accepted into the scheme.
Equitable says the downgrade does not cause use the current or extended crown guarantee to cease, nor does it give the Crown any automatic rights to withdraw the guarantee.
"There is no impact to existing or new investments since the change in credit rating was announced."
"In our view the change in rating does not materially change our business. We will continue to manage our position in the same conservative manner that has seen it maintain normal trading conditions throughout the past two years.
"Equitable is currently in a strong liquidity position with in excess of $45 million held in cash deposits, and we are well positioned to manage through the skewed October 2010 maturity profile."
S&P said Equitable has kept adequate liquidity to meet its needs over the next three months as the initial guarantee expires, and has a reinvestment rate holding up at 55%.
The downgrade comes on the same day S&P cut South Canterbury Finance deeper into junk territory as the deadline for its recapitalisation plan looms, while Allied Nationwide Finance, a unit of Allied Farmers, was sent to the receivers after it defaulted on a payment to debenture holders.
| « South Canterbury rating cut to CC | S&P finally delivers some good news » |
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