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NZ business in credit rating tailspin

By Phil Boeyen, ShareChat Business News Editor

Tuesday 2nd October 2001

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The trend of credit downgrades for corporate New Zealand is unlikely to turnaround any time soon says ratings agency Standard and Poor's.

The agency has published figures showing that of the 114 corporate entities it currently rates in New Zealand and Australia only five have either a positive outlook or CreditWatch positive on their rating.

S&P has pointed to the recent spate of high-profile corporate collapses, such as One.Tel, Pasminco and Air New Zealand's (NZSE: AIRVA) Ansett business, as an indicator that things are getting worse.

It also uses the number of rating upgrades and downgrades as a barometer of underlying credit quality. This comparison shows that for the first nine months of this year 19 Australian and New Zealand companies had their ratings upgraded but 38 were downgraded.

S&P's managing director, Chris Dalton, says although the local trend isn't as bad as the global picture, where downgrades outweigh upgrades by ratios of up to four-to-one, that's partly due to the absence of a local speculative grade bond market.

"Within Australia and New Zealand the corporate sector bore the brunt of rating activity during the first three quarters of 2001 and presents a much bleaker picture than the headline data.

"A total of six corporate issuers were upgraded in the first nine months of this year compared to 27 downgrades. This quarter's ratio of 4.5 to one is an increase on the ratio for the first six months of this year."

As examples, S&P says Pasminco's rating has been downgraded four times this year and Air New Zealand has been downgraded twice.

Mr Dalton says the examples are indicative of the underlying trend and he sees no turnaround in the near future.

"The collapse of Ansett and the uncertainty in world markets mean that Australian and New Zealand companies are facing increasing challenging times from a credit perspective," he says.

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