Market concerns that South Canterbury Finance faces unintentional negative investor sentiment are apparent after international ratings agency Standard & Poor's further downgraded the finance company.
The downgrade followed unrelated investigations into other private companies of South Canterbury's majority shareholder Allan Hubbard. Some of his private entities have been placed in statutory management by the Government.
Standard & Poor's released the downgrade on South Canterbury yesterday, from B+ to B- long term and short term to C, both on negative credit watch, but this development will not affect its inclusion in the Government's extended deposit guarantee scheme.
Craigs Investment Partners broker Peter McIntyre said the downgrade did not come as a surprise, following an earlier downgrade on May 28, as Mr Hubbard's close links to South Canterbury could not be ignored by S&P, nor could recent increased borrowings by South Canterbury.
"This is a case of guilt by association," Mr McIntyre said.
He had predicted a further downgrade in early June, when South Canterbury announced it had increased lending from the so-called Torchlight 'vulture fund' of South Island businessman George Kerr, by $25 million to $100 million.
S&P credit analyst Derryl D'silva said yesterday the downgrade "will likely erode debenture investor confidence, which is critical to South Canterbury's ability to manage its liquidity and its significant debenture reinvestment requirement".
South Canterbury chief executive Sandy Maier the Government's appointment of statutory managers over Mr and Mrs Hubbard, Aorangi Securities Ltd and seven trusts on Sunday "had created uncertainty for the rating agency".
A memorandum to amend South Canterbury's current prospectus would be registered "as soon as possible".
Mr Maier said nothing had changed regarding the Crown's extended retail deposit guarantee scheme, which remains in place until December 2011.
That had been acknowledged by Treasury this week.
South Canterbury was "specifically excluded from the statutory management order" over the Hubbards and their business interests.
