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S&P hedges its bets on GFNZ's rating

Standard & Poor's warms to GFNZ’s moratorium exit, but isn’t roundly applauding it.

Wednesday, July 17th 2013, 7:47PM

The agency has placed its 'CCC' long-term issuer credit rating on GFNZ, formerky Geneva Finance, on CreditWatch with positive implications.

Its 'C' short-term issuer credit rating on GFNZ has been affirmed.

"We placed the ratings on CreditWatch with positive implications because we expect GFNZ's new funding arrangements to improve the company's liquidity profile, which is our key rating factor," said Standard & Poor's credit analyst Harry Hu.

We believe there is at least a one-in-two chance that we may raise our ratings on GFNZ after we further assess the terms of GFNZ's recently negotiated funding transactions once they are approved.

The company recently announced three transactions which once approved by shareholders would mean it exits its six-year long moratorium on August 1.

S&P says it expects some benefit to GFNZ's business risk profile from more stable and ongoing funding facilities.

“We are yet to assess the extent of this benefit. On the other hand, we still need to evaluate whether the terms of the transactions, particularly the ring-fencing of securitised receivables, would heighten the risk of non-payment to other debtholders, particularly over the next 12 months.”

Hu says the agency aims to resolve the CreditWatch within the next three months “once we have clarity on the approved and finalised terms of the new funding transactions." 

“At a minimum, GFNZ would need to demonstrate it will not face payment difficulties over the next 12 months to benefit from a one-notch upgrade.

“Any rating uplift beyond that is less likely in the short- to medium-term but could occur if the improvement in the company's funding and liquidity stability and its business risk profile is greater than we currently anticipate.

“Any uplift in the rating assumes that the ring-fencing of securitised receivables would not heighten the risk of non-payment to other debtholders.

“Conversely, we could affirm the long-term issuer credit rating if we believe that the proposed funding transactions do not materially benefit GFNZ's credit-standing or are not approved by the shareholders. 

“We note that a CreditWatch positive placement is not necessarily a precursor to an upgrade,” Hu says.

« Six-year moratorium about to end for GenevaF&P profit up 20% »

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