Standard and Poor's rates Vision Securities at 'B' with negative outlook

Standard and Poor's has assigned a 'B' long term credit rating to property financier Vision Securities and given it a negative outlook. A 'B' rating is insufficient for the finance company to get an extension to its current government deposit guarantee beyond October this year. The deposit guarantee extension from October this year until the end of 2011 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.

Standard & Poor's Ratings Services said today it has assigned its "˜B' long-term counterparty credit rating on Vision Securities Ltd. (VSL), a mezzanine property-development financier in New Zealand. At the same time we assigned our "˜B' short-term rating. The outlook is negative. "Our ratings on VSL reflect its business profile as a New Zealand mezzanine property-development financier," Standard & Poor's credit analyst Peter Sikora said. "We regard this as a high-risk lending category. The ratings also reflect VSL's weak capital position, which is small and moderated by related party loans, and its concentrated loan portfolio. VSL also has a concentrated and vulnerable funding profile." Despite this, VSL has been able to manage its business through what has been a difficult time for property-development-focused finance companies raising debentures in New Zealand. The rating also recognizes our view that VSL will successfully finalize a recapitalization transaction by the end of third-quarter (calendar) 2010, and that balance-sheet liquidity will improve with the successful relaunch of the company's debenture stock prospectus by April 2010 and with the receipt of asset-sale proceeds over the next few months. "The negative outlook recognizes VSL's recent reduction in balance-sheet liquidity and the structure of the recently arranged recapitalization transaction," said Mr. Sikora. "A revision of the outlook to stable would require a boost in balance-sheet liquidity back to levels seen before VSL's temporary exit from the retail debenture market in September 2009 and the successful sale of VSLL shares to AIG." The ratings could be lowered if the company's funding and liquidity positions were weakened materially as a result of worsening asset quality or profitability. We do not expect to raise the ratings on VSL any time soon; this would require a material increase in diversification and further evidence that the company can continue to manage funding, liquidity, and asset quality.