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S&P says Chch City debt levels already high, but any downgrade would only be 1 notch

S&P says Chch City debt levels already high, but any downgrade would only be 1 notch

Credit rating agency Standard & Poor’s says it has put its Christchurch City Council and Christchurch City Holdings ratings on CreditWatch with negative implications ahead of more analysis of the financial and operational consequences of Saturday morning's earthquake.

S&P has a ‘AA+’ rating on Christchurch City Council and its subsidiary Christchurch City Holdings. The credit rating agency said it was monitoring developments in Christchurch to gauge the situation faced by the council and its holdings company in dealing with the effects of the earthquake on their assets and operations.

"We have previously noted that Christchurch City’s debt levels are high for the current rating and approaching levels that could lead us to reassess the rating," said S&P.

"We expect to resolve the CreditWatch during the next 90 days as more-accurate information becomes available regarding the extent of damage and state of repairs, insurance coverage, and the impact of the quake on these entities’ risk profiles, among other factors."

It noted there had been widespread damage to infrastructure assets, although most of this should be insured.

"There may also be secondary effects on the council, as the council not only replaces infrastructure but also participates in the rebuilding of the local community’s assets. Based on any such information and its implications on the credit quality of Christchurch City and/or the holding company, we may take further rating actions as the situations warrants. Any rating action would not likely exceed one notch downward."

Meanwhile, S&P said the earthquake had no immediate implications for Christchurch International Airport's A- credit rating.

"The airport’s operations are continuing and have been largely unaffected by the earthquake," S&P said. "The company has also indicated that it will seek reimbursement via insurance to complete repair work identified at the airport to date. In our view, the airport’s liquidity is adequate."

That said, downward pressure on the rating may emerge if there were "substantial and prolonged negative implications" from the earthquake on the airport's passenger traffic, or if cash flows were materially affected by repair works, or if the airport's operations were negatively affected.

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The ChCh Mayor keeps harpng on about the Council's high credit rating but fails to realise that the only reason for this rating is the ability of the Council to tax it's ratepayers.  However as the European Sovereign debt crisis is now showing this revenue is no longer guaranteed.  Many ChCh ratepayers are very angry because of the extravagant spending that Parker and his Councillor lapdogs, who vote with him because he appoints them to Directorships on the many Council owned enterprises, have undertaken.  Examples are the palatial new Council offices, opened last week, that cost $120 million.  Also two years ago CCC paid Dave Henderson $17 million, as a bailout, for land and property that has remained vacant all this time.  Hopefully he will be thrown out after the November election.

Andy, what about the ratepayer funded sandcastle trip? That was a cracker...

Yes Gareth I forgot about that one, but it was only $4,000, which is small change for CCC!

I hadn't seen that story before GV. As a kiwi living abroad it's good to see NZ is left in great hands LOL 

"It wasn't a sand-castle competition it was sand-sculpture..."

Maybe they could get that lady back as a consultant to help with the rebuilding effort!

That lady is a current Councillor, who is not standing for re-election (I wonder why?).  However she won't starve as she is one of Bob's mates and last month was made a Director of the CCC owned lines company Orion.  Now that's a coincidence!

It could be put down to 'Investugations into liquifaction'.