Two top finance companies junked

Standard & Poor's has stripped both South Canterbury Finance and Marac of their investment grade ratings.

The research house yesterday lowered the ratings on both companies from BBB- to BB+ which takes them from "investment grade" to what S&P calls "speculative" but what others call "junk bond" status.

In making the announcements S&P released two remarkably similar press releases. The wording of both blamed the downgrades on the companies' exposure to the property development sector.

"The downgrade reflects our view that SCF's credit profile has weakened because of asset quality pressures within the New Zealand property development sector," Standard & Poor's credit analyst Derryl D'silva said. "In our view, this deterioration is outside our tolerances of the ‘BBB-' rating and has occurred amid a weak industry environment, where the potential for lending losses is exacerbated by the softening trends in the New Zealand economy. The property development sector is currently experiencing very low business confidence and faces reduced investor demand and limited refinancing options."