S&P downgrades Geneva to 'Selective Default' from CC after new repayment plan

Ratings agency Standard and Poor's has downgraded Geneva Finance to SD (Selective Default) from CC after investors in the Auckland-based personal finance company agreed to extend their repayment plans by about four years. "In our view, this arrangement is considered a distressed exchange offer and has resulted in a selective default under existing terms and conditions between Geneva and its investors," S&P said. Here is the full S&P statement below.

Standard & Poor’s Ratings Services said today that it had lowered its long-term rating on New Zealand finance company Geneva Finance Ltd. (Geneva) to ‘SD’ from ‘CC’. At the same time the rating was removed from CreditWatch Negative, where it was initially placed on Feb. 22, 2010. This rating action follows Geneva’s announcement that it has reached an agreement with its investors and BOS International, under which all classes of investment maturities are to be extended by about four years. Under the revised agreement, the debenture and subordinated note investors have opted to defer approximately 30% of their currently scheduled principal repayments, which Standard & Poor’s would view as a selective default. However, Geneva will continue to pay interest each month at the individual investor contracted interest rate. In our view, this arrangement is considered a distressed exchange offer and has resulted in a selective default under existing terms and conditions between Geneva and its investors. Under these circumstances, the long-term rating on Geneva Finance is lowered to ‘SD’. Now that this new arrangement is approved, we will review the ratings on Geneva for the nature and extent of potential future support from bankers. We will also review management’s ability to manage its current and forecast operating cash flows and handle negative asset quality pressures. It is likely that the rating on Geneva could be raised to the ‘CCC’ rating category from ‘SD’ but with a negative outlook