S&P keeps EQC's AAA credit rating unchanged after earthquake cost blows out
By Paul McBeth
Aug. 30 (BusinessDesk) – Rating agency Standard & Poor’s has reaffirmed the Earthquake Commission’s ‘AAA’ rating after the cost of the Canterbury quakes blew out by $4 billion to $7.1 billion.
The rating agency said the New Zealand government is “almost certain” to stump up any extra support the disaster funding agency needs if there is extra stress, even though the EQC’s “standalone creditworthiness has materially deteriorated.”
Finance Minister Bill English today said the extra cost will push out the budget deficit to $18 billion for the financial year ended June 30 and puts the government on the hook for any added liability after drawing down the entirety of the $6 billion Natural Disaster Fund.
“We believe any shortfall will be met by the EQC calling on its government guarantee,” the rating agency said.
S&P didn’t add any extra comment to New Zealand’s sovereign rating, which is ‘AA+’ on a negative outlook, as it is working through the implications of the revised estimates.
English affirmed his commitment to keep net debt at below 30% of gross domestic product, and said he still expects the budget to return to surplus in the 2014/15 financial year.
The New Zealand dollar was little changed on the S&P statement, recently trading at 85.21 U.S. cents, and is up from 84.50 cents this morning.