Pacific Retail Finance joins the rated

Pacific Retail Finance Limited (PRF) has received credit ratings by two international agencies in response to a growing demand by intermediaries and investors for finance companies to be rated.

Friday, 1 July 2005

Standard & Poor’s has given it a BB- rating, which is sub-investment grade, and Rapid Ratings has given it a B3.

PRF chief executive Greg Cathcart says PRF is satisfied with its ratings, which provide a benchmark for intermediaries and investors to evaluate the company.

PRF recently reported a record $13.7 million pre-tax profit for the 12 months ending March 31, which Cathcart says builds on its track record of sustained performance and growth.

Standard & Poor’s said that its rating was based on PRF’s adequate risk-based capitalisation, though limited absolute capital level, and its solid earnings record and reasonable geographic diversification.

Moderating the rating are the higher risk nature of PRF’s asset base, the company’s limited market position and profile as a midsize player in the highly contested retail asset finance market, and its concentrated debenture funding profile.

However, Standard & Poor’s noted that PRF was “a viable business with some resilience likely to any weakening of the economic environment”.

Cathcart says investors and advisers are putting pressure on finance companies to get ratings. “It is now inevitable that finance companies will have to go through the ratings process in the near future in order to remain competitive.”

Cathcart says he believes any institution raising public money, regardless of whether they are a finance company, building society, credit union or some other form of financier, should have a publicly disclosed rating.

“The Securities Commission’s recent report into finance company disclosure makes it very clear that it considers a rating is material information that should be in the public domain. We endorse this approach as we believe that the increasing disclosure of ratings will allow more transparent and meaningful comparison between industry participants,” Cathcart says.

PRF has been flagged for possible sale by its parent, New Zealand-based consumer product retailer Pacific Retail Group through a trade sale by August 2005.

S&P says the developing rating outlook indicates the uncertainty about future ownership and structure, and that the rating assigned could increase, decrease, or stay the same, depending on the financial strength characteristics of an acquirer.

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