Marac on the cusp of bank grade credit rating

Friday 17th September 2010

Marac Finance, the lending arm of Pyne Gould, is on the cusp of regaining its investment grade credit rating after its junior partners in a bid to form a new bank formally signed up to the idea.

Marac's BB+ credit rating has been placed on creditwatch positive by Standard & Poor's, with a successful merger between PGC's unit and the Southern Cross and Canterbury Building Societies likely to lift it one notch to BBB-, the minimum requirement to achieve a bank licence.

"A higher rating on Marac would be based on Marac forming a core part of the proposed merged group," said credit analyst Derryl D'Silva in a statement.

"We believe that the group would benefit from increased scale, diversification, and geographic reach across New Zealand."

S&P left the outlooks on SCBS and CBS' respective BB and BB+ credit ratings unchanged as they would be removed if the merger goes ahead.

Yesterday, the boards of the three financiers signed a merger implementation agreement that would see the merged entity list on the NZX, with PGC holding 71% of the firm, and the building societies each controlling 14.5%.

The merger would create a lender with $2.2 billion of assets and accomplish Marac's goal of becoming a registered bank. Marac's aspiration was dented last year when its credit rating was downgraded to a speculative BB+.

PGC's shares fell 2.4% to 41 cents in trading today, while CBS' stock extended its gains 3.5% to $3.00.

Businesswire.co.nz

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