S&P dishes out another three ratings

Standard and Poor's have announced its credit ratings for Fisher and Paykel Finance, PGG Wrightson Finance and Manchester Unity.

Wednesday, 17 February 2010

Fisher and Paykel Finance
It has assigned a BB rating to Fisher & Paykel Finance with a stable outlook. The rating means that the company will be eligible to apply for the extended government guarantee scheme.

S&P says the ratings reflect F&P Finance's exposure to the cyclical consumer segment, its reliance on continuing banker confidence and support, and S&P's view of its parent, NZX-listed Fisher & Paykel Appliances.

The finance company has a good market position in the New Zealand consumer finance segment, its diversified customer base, and its good risk-management capabilities, S&P says.

The outlook reflects S&P's expectations that the company's financial characteristics will remain stable in the medium term. The ratings could be raised if Fisher and Paykel Finance were to become more independent from its parent, along with ongoing strengthening of its financial profile--building on recent efforts to reduce funding risks and increase capital.

PGG Wrightson Finance
Meanwhile S&P has assigned its BB credit rating to PGG Wrightson Finance with a stable outlook.

"The ratings on PWF reflect our opinion of the company's exposure to the agriculture sector, which is riskier than some other sectors, and its high-albeit reducing-counterparty concentration risk," Standard & Poor's credit analyst Gavin Gunning said. "Nonetheless, these weaknesses are offset by the company's good brand in New Zealand's rural finance services market, stemming from the company's national footprint and access to its parent's broad distribution platform and large rural client base. PWF's reasonably diversified funding sources also support the ratings."

"The stable outlook reflects PWF's reasonably diversified funding sources, our expectation that the company's improving capital position should give PWF some headroom to weather further industry challenges, and PWF's strategic importance to PGG Wrightson," Gunning says.

"In addition, we believe that PGG Wrightson's recent recapitalization and refocused strategy should enhance its capability to support PWF if needed."

Upward rating movement in the near term is unlikely, although such a scenario may be considered in the medium-to-long term if the credit profile of PWF's parent improves, combined with no diminution of PWF's own credit profile or its core role within the group.

Manchester Unity
S&P announced a third rating yesterday - this time to credit union Mancester Unity.

The Napier-based organisation received a B+ rating and a stable outlook.

"The ratings on MUCU reflect the credit union's very small capital base by international standards, and the below-peer capital ratios, at-call deposit base, and key-person risk associated with the small size of its business operations," Standard & Poor's credit analyst Gavin Gunning said.

"These factors are offset by MUCU's very good credit-loss history and its low risk appetite."

"The stable outlook reflects our expectation that MUCU will continue to demonstrate very good asset quality, even though New Zealand has only recently emerged from recession," Gunning said.

The ratings could be troubled, however, if a major operational risk or other negative event were to affect MUCU-in particular something that distresses capital or its at-call deposit base.

"While we do expect to be raising the ratings in the short term, this may happen in the long term consistent with MUCU's intention to introduce term deposits during 2010. If this strategy succeeds, it will ameliorate the risks associated with MUCU's at-call deposit base. Lasting benefits, however, are not likely to arise for some years."

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