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Marac gets a bit of a lift from S&P

Wednesday 11th of August 2010

The ratings agency has affirmed its BB+/B issuer credit ratings on the New Zealand finance company.

"The rating affirmation recognizes MARAC's stabilised asset quality position, which had previously come under pressure from the challenging domestic operating environment," Standard & Poor's credit analyst Derryl D'silva said. "The affirmation also reflects MARAC's adequate liquidity position and its supportive capitalization, which has benefited from a capital injection and the sale and transfer of impaired commercial property loans to a related company. Also supporting our rating is MARAC's good market position in the New Zealand finance industry."

Moderating factors are: MARAC operates in higher-risk lending segments; its funding position could be vulnerable to unexpected weakening in its own credit profile or emerging industry pressures; and its earnings are likely to remain under some pressure from ongoing, albeit more-moderate, new loan loss provisioning.

The stable outlook reflects our view that MARAC will maintain a financial profile that supports the ‘BB+' rating. We expect that still-high arrears will continue to trend down and new loan loss provisions will be lower than recently experienced and will not constrain MARAC's future profitability or compromise its capital adequacy position. We also expect MARAC will maintain an adequate liquidity position by retaining the support and confidence of its bankers, and that it will continue to increase the proportion of non-guaranteed debentures to manage its funding position after the extended government guarantee expires in December 2011.

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