South Canterbury sweating on liquidity

S&P downgraded the Timaru-based finance company this week to BB from BB+, and put it on a creditwatch negative, giving the firm a 50:50 chance of a further downgrade in the next 90 days.

Credit analyst Derryl D'Silva told depositrates.co.nz that the company's liquidity was the main cause for the negative outlook, and that the government guarantee had caused a lot of debt to fall due around the end of the first tranche of the scheme.

"The creditwatch negative risk relies on stakeholders' reaction, and whether they will continue to support the company," D'Silva said. "They're weaker than other non-bank deposit takers with a BB+ rating."

South Canterbury Finance flagged a $1.1 billion hole of debt coming due before the expiry of the existing government guarantee on October 12, and chief executive Sandy Maier has acknowledged that the extended guarantee has made itself a necessity in giving investors piece of mind to roll-over their deposits.