At the same time Standard & Poor's affirmed Business Finance's 'BB' long-term and 'B' short-term counterparty credit ratings.
Standard & Poor's credit analyst Peter Sikora said the outlook revision recognises its view of the good and stable operating performance of Australia-based Liberty Financial, being Business Finance's 50% shareholder and guarantor.
"It also reflects our view that Liberty will remain successful in effectively managing its business position, asset quality, operational performance, and capital adequacy position as a niche-based financier and at a level supportive of a ‘BB' rating.
"Critical to the stable outlook is our expectation that Liberty will maintain good access to, and support from, wholesale and bank lending markets, with the benefit of its good operating performance."
He says factors moderating the assessment of Business Finance's stand-alone credit profile include: the company's concentrated funding profile; uncertainty relating to its ability to re-establish its retail debenture funding base under its new joint-venture structure and its modest absolute capital base.
Factors supporting Business Finance's stand-alone credit profile include Standard & Poor's favourable view of the company's business strategy and its measured growth plans, which should help the company effectively manage and limit its risk profile as it expands its business and establishes its market position.
Sikora said Business Finance's rating could come under pressure if the company were to become a more material contingent liability on Liberty and, consequently, Standard & Poor's moderated its view of Liberty's credit profile.
"Liberty's credit profile could come under pressure if the performance of its financial assets deteriorated materially such that there was insufficient excess income to absorb losses in underlying assets, or if this led to Liberty bearing a material decrease in earnings or principal losses from these investments."
He said the company's credit profile could also come under pressure if it were to embark on an aggressive asset-growth path that contributed to its key financial metrics deteriorating.
In addition, the rating would be lowered if cover if the guarantee from Liberty weakened or was withdrawn.
"We do not expect to raise the ratings on BFL in the short term. An upgrade would require an improvement in our opinion of the credit profile of the wider Liberty group," said Sikora.
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