S&P lowers Asset Finance's credit rating to "B-"
By Jenny Ruth
March 18 (BusinessDesk) - International ratings agency Standard & Poor’s Corp says it has lowered Asset Finance’s credit rating to "B-" following its changing ownership.
London-based Blackstar Capital Group, which was founded in 2011, bought 82 percent of the Whakatane-based Asset Finance in September last year.
The downgrade is despite no change to Asset Finance’s stand-alone rating “reflecting the largely stable business and financial strategy of the finance company,” S&P says.
When the sale was announced last September, Blackstar said it was taking its stake in Asset Finance from 7 percent to more than 70 percent for an undisclosed sum, but the accounts show its stake at 82 percent at Sept. 30 last year.
Another 10 percent is owned by the Hodgetts Family Trust and the remaining shares by other minority investors believed to be staff of Asset Finance which lends to small businesses and consumers which can provide assets as security.
About 33.4 percent of its loan portfolio at Sept. 30 was secured by first mortgages with another 15.8 percent secured by second mortgages and 26.3 percent secured by motor vehicles.
S&P says Blackstar’s creditworthiness is slightly weaker than Asset Finance’s because of its “very small market share and modest business position” in its main business lines of specialist trade finance and deal origination and structuring.
Asset Finance’s regulatory and governance framework “does not afford it sufficient insulation from the broader BCG group” to allow it a higher rating than its parent company.
Asset Finance’s accounts show it had shareholders’ funds of $6.13 million at Sept. 30, a loan book of $20.1 million and a $19.5 million debenture book.
It recorded a 64 percent drop in net profit to $284,483 for the six months ended September, largely because of a jump in impairment losses to $812,593 from $68,376 in the year-earlier six months, a 15.5 percent fall in lending, establishment and factoring fees and a 4.3 percent fall in interest revenue.
S&P says Asset Finance “is exposed to significantly higher credit risk inherent in its target lending segment compared with the mainstream banking system in New Zealand” and the high financial leverage of its parent also constrains the group credit profile.