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BIL debt ratio and asset liquidity raise concern

By Phil Boeyen, ShareChat Business News Editor

Friday 28th September 2001

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Standard & Poor's has lowered Brierley Investments (NZSE: BRY) ratings and placed the company on negative creditwatch because of concerns over the liquidity of its assets.

BIL's long-term credit rating has been dropped to BB+ from BBB- and its short-term lowered to B from A-3 in the latest S&P review.

S&P says the changes reflect the fact that the company has around 50% of its assets in two major listed investments - Thistle Hotels and Air New Zealand.

"Furthermore, unlisted investments represent about 30% of the portfolio and include assets with uncertain liquidity prospects," the ratings agency says.

"The financial problems faced by Air NZ, as well as the negative impact on global travel and hotel industries arising from the Sept. 11, 2001, terrorist attacks on the U.S., further reduce Brierley's asset liquidity."

S&P says although the company has realised from substantial asset sales in the past year, including the sales of its 29% stake in James Hardie, new management has a tougher task of realizing value from remaining assets.

Brierley's asset coverage of debt is also an issue.

"Although upcoming debt payments over the next six to nine months appear to be manageable, Brierley has a US$600 million bank credit facility maturing in July 2002," S&P says.

"As the current environment for asset sales remains challenging, the company will likely have to rely on its bankers' support to refinance or roll over this upcoming debt payment either partially or in its entirety."

Standard & Poor's says it will complete its review of Brierley within the next few weeks, following further discussions with management.

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