S&P ratings below BBB- are the last rung of the grading ladder before falling from investment to non-investment grade - BB+ rated issues are often referred to as junk bonds.
Principal owner and chairman of South Canterbury Finance Group, Timaru accountant Allan Hubbard, said SCF was about to announce a float as part of the finance company's recovery plans.
Craigs Investments Partners broker Peter McIntyre said SCF planned a $200 million float in 2005, but pulled out.
However, with its loan book having since grown to $1.6 billion, it was likely to seek more than $200 million from any initial public offering (IPO).
"S&P would look on an IPO favourably as SCF would then have access to capital through shareholders' funds, placements and rights issues."
Investor support for an IPO was difficult to gauge as the "economic landscape" had changed significantly since 2005, Mr McIntyre said.
In a flurry of market activity earlier this year, more than 20 listed companies successfully raised more than $4 billion in bond and equity issues to underpin balance sheets, especially those with increasing debt ratios which threatened to break banking covenants.
SCF has come under increasing pressure in recent months because of the extent of related-party loans to other Hubbard interests, estimated at about $130 million.
Those loans must be reduced to get a S&P upgrade, but the August-downgrade also carries a negative outlook on SCF, meaning there is a one-in-three chance of further downgrading within a year.
SCF remains in the Government's retail guarantee deposit scheme, which was last week extended to October 2011, but it must retain a BB or better rating or face exclusion.
During the past two years, increasing risk aversion saw reinvestment rates fall as a precursor to most of the more than 20 finance company failings or moratoriums, involving about $4 billion.
Mr Hubbard injected $40 million into SCF in early July and recently initiated a $25 million underwriting of specific non-performing loans at book value.
Late last week, SCF announced its provision for loan defaults had risen from $8.6 million a year ago to almost $50 million, and its before tax profit from a year ago at $88.8 million had fallen to a $71.2 million loss - the latter prompting a technical breach of its interest coverage covenants on unused banking facilities.
The mid-August S&P downgrade has prompted talks between SCF and a consortium of five subscribers to a $US100 million ($NZ145 million) private placement facility.
Because of the downgrade, those subscribers are now entitled to seek repayment within three months.
SCF chief executive Lachie McLeod could not be contacted yesterday.
