South Canterbury Finance received some end-of-year good news from Standard & Poor's when the credit rating agency affirmed its current ratings and removed one from a negative credit watch.
The removal from the credit watch was a step away from a potential downgrade as the finance company continues on its path of restructuring in readiness for a listing in 2010.
S&P affirmed South Canterbury Finance's BB plus long-term rating and removed it from CreditWatch Negative, where it was placed on September 20.
The outlook on the rating is still negative.
"The rating affirmation reflects SCF's success in ameliorating specific concerns raised when we placed the rating on CreditWatch negative," S&P credit analyst Derryl D'silva said.
Specifically, SCF could again access the debenture-investor market, it retained the confidence of its new private placement investors as well as its debenture investors, and its audited financial statements for the 2009 financial year revealed nothing of concern.
SCF chief executive Nigel Gormack said the change in outlook meant the rating had gone from a one-in-two chance of a downgrade to about a one-in-three chance of a downgrade.
"It is positive on two fronts. They have affirmed the rating and said there is less chance of you being downgraded in the future.
"It is an independent acknowledgment that we are on the right track," he said.
Mr D'silva said a downgrade of the company's credit rating by S&P in August gave investors in the private placement market in the US the right to be repaid $US100 million ($NZ142.53 million).
"Our immediate concern is that South Canterbury Finance maintain higher liquidity, leading up to its recapitalisation plans; its failure to do so would likely to lead to the company being downgraded."
Negative pressure would abate if South Canterbury Finance was able to moderate liquidity pressures, manage its credit loss experience, eliminate related party investments and successfully restructure and recapitalise its business to a level that was consistent with a BB plus rating level, Mr D'silva said.
