Broadlands chief executive Rudi Kats says he is "very pleased" with the rating "at this time given that a number of New Zealand's foremost finance companies are only one notch higher"

S&P says the outlook is negative due to the company's "vulnerable liquidity".

More than half of its outstanding retail debentures are maturing in the coming 12 months, and its cash position in part hinging on the collections from its higher-risk consumer loan portfolio.

S&P credit analyst Gavin Gunning notes Broadlands has a fairly diversified debenture investor base, and the company's sole shareholder has a track record of providing liquidity support to it where necessary.

Although Broadlands' credit-loss experience has been fairly well managed to date, the credit profile is moderated by the higher-risk nature of the company's loan-receivables portfolio, which exhibits a high level of loan arrears. Broadlands' funding base relies heavily on its single shareholder, in the form of debts as well as equity, and its business profile also links to the experience and connections of the shareholder.

Favorable features of Broadlands' credit profile include the company's good interest margins and capital-adequacy ratio, which provide good capacity for absorbing materially higher credit losses.

"The negative rating outlook incorporates the uncertainty around Broadlands' ability to manage its liquidity position through 2010-stemming from changes to New Zealand's deposit-guarantee scheme and the imposition of other regulatory requirements on New Zealand non-bank deposit-taking companies-and an expectation that profitability may come under pressure from some contraction in interest margins and potentially higher credit costs," Gunning says.

Further explicit support for Broadlands from its shareholder, however, could contribute to upwards rating momentum, or, at a minimum, greater ratings rigidity at the current rating level.