GFL
01/08/2012 10:51
CREDIT
REL: 1051 HRS GFNZ Group Limited
CREDIT: GFL: Confirmation of GFNZ Grp Standard & Poors Credit Rating
Confirmation of GFNZ Grp Ltd Credit Rating
As noted in GFNZ Group Limited's March 12 annual accounts, on 4th June 2012
GFNZ Group Limited's credit rating was placed on Credit Watch Negative,
Pending Possible New Funding
Below is an extract from the Standard and Poors update
Research Update:
Ratings On GFNZ Group Ltd. Placed On
CreditWatch Negative, Pending Possible New
Funding
Overview
o New Zealand finance company GFNZ Group Ltd. (GFNZ) will need to meet
NZ$4.9 million in repayment needs at the next scheduled payment date
(September 2012).
o GFNZ recently gained traction on a NZ$6 million receivable finance deal
with Federal Pacific Group Ltd. (FedPac), although the deal is not yet
legally binding on the investor.
o Should this new funding not be successful, the risk of defaulting on the
next scheduled debt repayments will significantly increase.
o We are placing the 'CCC-' rating on GFNZ on CreditWatch with negative
implications. We expect to resolve the CreditWatch placement after the
settlement of the receivable finance deal with FedPac, should it be
successful.
Rating Action
On June 5, 2012, Standard & Poor's Ratings Services placed its 'CCC-'
long-term issuer credit rating on New Zealand finance company GFNZ Group Ltd
and GFNZ's wholly owned insurance subsidiary, Quest Insurance Group Ltd., on
CreditWatch with negative implications.
Rationale
The CreditWatch action reflects GFNZ's reliance on the proceeds from a
receivable finance deal with Federal Pacific Group Ltd. (FedPac) --a recent
shareholder, holding 19.9%--to meet NZ$4.9 million in scheduled repayment in
September 2012. Although this deal recently gained momentum upon the
formalization of Prime Asset Trust Ltd. (a vehicle for GFNZ's receivables to
be transferred and held for the benefit of investors), it is not legally
binding on FedPac at this stage.
Based on earlier investment documentation and Standard & Poor's recent
discussions with GFNZ management, the intention is to obtain NZ$3 million of
new funds in June 2012, and another NZ$3 million in September 2012. These
steps reflect GFNZ's New Zealand Stock Exchange announcement on Feb. 28,
2012,
indicating FedPac's assistance with ongoing financing needs. In our view,
given the proximity of the next scheduled payment date, the timely receipt of
invested proceeds is essential to avert possible negative actions on GFNZ's
creditworthiness.
Under the receivable finance scheme, interest is capped at 11.25% per annum,
and funds will be invested for a maximum 48-month term, with the initial 24
months paying interest only. Invested amounts will be secured by eligible
receivables, with a 20% equity buffer provided by GFNZ.
In addition to the receivable finance scheme illustrated above, and among
other funding initiatives, GFNZ is at final stages of getting a new debenture
prospectus to market. In our view, the amounts invested are likely to be
small
in the initial months, with the receivable finance deal pending and the next
scheduled repayment date drawing near. However, should new debenture money
reach substantial levels and demonstrate stable patterns, there is scope to
revisit our rating accordingly in the longer term.
Liquidity
GFNZ needs to meet scheduled debt repayments each March and September, out to
2015. The amount of these repayments is significant to GFNZ's cash flows,
with
the next repayment of NZ$4.9 million due in September 2012. The receivable
finance proceeds of NZ$3 million in June 2012 and another NZ$3 million in
September 2012 is, in our view, crucial to meeting these repayment
obligations, given the limited cash held and unavailable bank draw-downs.
Furthermore, we do not believe the new debenture prospectus will raise
sufficient funds to alleviate the liquidity pressure in the short term. We
also believe there is limited opportunity to negotiate other material sources
of funding ahead of the next repayment date to sufficiently meet this need.
CreditWatch
We expect to resolve GFNZ's CreditWatch placement after the settlement of the
receivable finance deal with FedPac, should it be successful in raising the
required funds to meet the next scheduled repayment. Alternatively, we could
take negative ratings action if the receivable finance deal with FedPac were
not successful in raising the necessary funds as planned. A CreditWatch
negative placement indicates that we believe there is a 50% probability of
the
rating being lowered in the short term.
Over the longer term, and conditional on the receivable finance deal be
successful, there is scope for an upward revision should new debenture money
reach a substantial level and demonstration a sufficient level of stability.
Related Criteria And Research
o How Standard & Poor's Uses Its 'CCC' Rating, Dec. 12, 2008
o Rating Finance Companies, March 18, 2004
o Group Rating Methodology And Assumptions, Nov. 9, 2011
Ratings List
Ratings Affirmed; CreditWatch/Outlook Action
To From
GFNZ Group Ltd.
Counterparty credit rating CCC-/Watch Neg/-- CCC-/Negative/--
Quest Insurance Group Ltd.
Counterparty credit rating
Local currency CCC-/Watch Neg/-- CCC-/Negative/--
Financial strength rating
Local currency CCC-/Watch Neg/-- CCC-/Negative/--
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.
End CA:00225536 For:GFL Type:CREDIT Time:2012-08-01 10:51:26
(20min delay)