Standard & Poors has downgraded the long term credit rating of South Canterbury Finance (SCF), saying its financial position is not strong enough.
The international credit rating agency lowered the of the finance company 's rating from BB+ to BB, after it reported a loss of $155 million this week.
It says the downgrade could have been worse if Alan Hubbard had not moved to shore up SCF's balance sheet on Tuesday by shifting assets from his investment vehicle, Southbury Corporation, into the lender, injecting more than $150 million in new capital into the business.
Standard & Poors says SCF's deposit base is weaker than many other non-bank sector firms and the capital injection is not sufficient to warrant a BB+ rating.
It says if the debt worsens support form debenture investors weakens, or its recapitalisation plans falter, the credit rating could fall further.
SCF chief executive Sandy Maier says the board is working hard to ensure that does not happen.
"I don't think it will scare away investors and I don't think it should," he says.
"We understand that most investors are looking at the Government guarantee, there is absolutely no change to that. In fact that situation has improved because investors will know the door is open for the next extended guarantee scheme."
