NZF Money rated single B; unable to extend Govt Deposit Guarantee (Update 1)

Standard and Poor's has assigned a single 'B' rating to NZF Money, which means the personal finance company will not be eligible to apply for the government's deposit guarantee extension from October this year. The credit rating agency said the outlook was negative and the rating reflected the 'weakly capitalized' nature of its parent NZF Group and uncertainties around its liquidity through 2010. (Update 1 adds comments from NZF Money about plans to raise capital) The deposit guarantee extension is only available to those non-bank deposit takers with a BB rating or better. Finance companies must have a credit rating by March 1 under the Reserve Bank's new regulatory regime. Here is the full Standard and Poor's statement below.

Melbourne, Feb. 24, 2010"”Standard & Poor's Ratings Services today said it has assigned its "˜B' long-term counterparty credit rating to NZF Money Ltd. (NZF), a wholly owned subsidiary of New Zealand-based NZF Group Ltd. (NZF Group; unrated). At the same time, we assigned our "˜B' short-term rating to NZF. The outlook is negative. "The ratings on NZF reflect the company's status as a wholly owned subsidiary of weakly capitalized parent, NZF Group Ltd. and also recognize vulnerability potentially affecting NZF's liquidity over the coming 12 months, and some large lending exposures relative to size," Standard & Poor's credit analyst Gavin Gunning said. "We are of the view that the rating assigned to NZF Money Ltd. is constrained by its ownership by NZF Group Ltd., in particular because of NZF Group Ltd.'s weak capitalization." On the other hand, favorable features of NZF's credit profile include its moderate loan quality and profitability, by domestic standards. NZF's primary focus is on first-mortgage property lending and while its nonperforming assets and credit costs have increased, NZF has managed a recent period of difficult operating conditions better than most New Zealand finance companies specializing in property lending. "The negative rating outlook mainly reflects uncertainties concerning NZF's liquidity through 2010," said Mr. Gunning. A revision of the rating outlook to stable would require a track record showing that NZF was successful in managing its liquidity, funding, and asset quality risks through 2010 in what continues to be a challenging industry environment. "Upwards rating momentum is most likely to depend on a significant improvement in capitalization with no diminution in liquidity or other elements of NZF's financial profile."

Meanwhile, NZF Group Managing Director John Callaghan said in a statement NZF Group would have preferred that Standard and Poor's rated NZF Money on a standalone basis, but that NZF Group was now working with an advisor to raise fresh capital "This is currently being addressed with the engagement of specialist financial services consultant, Ecko Capital. NZF Group, together with Ecko, are currently in the process of formulating a recapitalisation plan, which is proceeding well," Callaghan said.