S&P said Equitable Mortgages is a central part of the wider Equitable group and retained its BB rating, meeting the criteria of the government's extension to the retail deposit guarantee, due to its emphasis on first-mortgage lending and the cornerstone shareholding of the Spencer family.

The rating agency does not think Equitable will require additional shareholder support to meet the Reserve Bank's expected 8% capital requirement, but if this fails to be the case, it predicts the Spencer family will inject enough money into the business to ensure that it does.

"Standard & Poor's believes that the Spencer family is committed to a strategic long-term ownership of Equitable, and will provide capital support to business growth," S&P analyst Mark Legge said in his report. 

Still, the rating agency, which downgraded Equitable to BB from BB+ in March, said the company has weak assets as the commercial property market continues to deteriorate, and has seen general arrears rising substantially over the past few years.

There was a "significant counterparty credit exposure with the top six such exposures account for close to 60% of the Equitable's loan book as at May 31," and its largest single-party exposure was for $29.6 million.

"Pressure on Equitable's financial profile given that unfavourable economic conditions may further increase arrears and delay realisation of poor quality assets" resulted in the company remaining on a negative outlook, the report said.

The rating agency raised concerns about the finance company's trustee setting a maximum counterparty loan limit of 10% of Equitable group's total tangible assets, and said it translates into individual exposures of around 100% of the group's tangible equity.

S&P said the finance company had been reducing the number of poor quality loans it has on its books, and could be well-placed to resume growth when commercial property stabilises.

Equitable was pleased to retain the rating, calling it a "positive achievement" given the stage of the market cycle.

"Our liquidity position is strengthening and we are managing our funds under management at a relatively stable level of approximately $250 million," said group product and marketing manager Andrew Mexted-Bragg in a statement. "While challenges remain in the industry, the shareholder, directors and executive of Equitable are of a view that we will emerge from the current cycle with a more robust business."