South Canterbury Finance's plans for its owner Southbury Corporation to list on the stock exchange faces headwinds on several fronts, while the listing remains crucial for it to maintain its Standard and Poors rating in coming months.
The 85-year-old South Canterbury Finance is in the midst of a recapitalisation and stock market listing through its parent company Southbury Group, via Southbury Corp, and has more than $1 billion coming due for payment during the next eight months.
Craigs Investment Partners broker Peter McIntyre estimated a stock market listing, by packaging up all its assets under the banner of parent Southbury Group, would have to be undertaken in the next three months and would look to raise $250 million-$350 million, "more likely towards the upper end". It was a "less than ideal time" for South Canterbury to be going to the market, given heightened concerns about the liquidity of several European countries and New Zealand investors' sentiment following several finance company failures.
"South Canterbury have some parts of the jig-saw, but there are other parts yet to arrive," he said yesterday on the lack of detail on recapitalisation.
In its six-month report to December, released on Monday, South Canterbury said its equity ratio was about 11.8% of its total assets of $2.15 billion.
Mr McIntyre said a successful capital raising, towards the upper $350 million estimate, would place South Canterbury on a better footing with its equity ratio of about 20%.
It was crucial it maintain its S&P rating of BB+.
A fall of two notches would exclude it from the replacement government guarantee scheme, and South Canterbury would have been working closely with S&P.
The Reserve Bank of New Zealand announced that credit ratings were now mandatory for non-bank deposit takers, which include finance companies such as South Canterbury.
Reserve Bank governor Alan Bollard said credit ratings were useful as they helped investors compare the relative riskiness of deposit taking institutions when deciding where to invest their funds.
