N.Z credit risk rating slips seven places

Press, 28 March 1981, Page 20

N.Z credit risk rating slips seven places

PA Wellington A major banking magazine has dropped New Zealand seven places in its credit risk league. Two years ago New Zealand headed the premier league, commanding the sharpest interest rates from eager buyers, according to the bankers' magazine Euromoney. Now Australia, Britain, Prance, Finland, Sweden, Canada, and Belgium have surged ahead in the magazines’ estimation of their credit-worthiness.

• Australia took over top spot on Euromoney's premier league by virtue of two loans to the Victoria Electricity Commission at terms ranging from •% to 5 /s per cent above the base libor rate.

India, placed ninth immediately behind New Zealand, “negotiated exceptional .terms” for a developing nation, a $3O million loan for Air India at rates ranging

from %to per cent above libor.

The magazine said that many of 1980 s borrowers were well down the table with the exception of Canada. sixth, and Mexico thirteenth.

Those to improve their ratings included Hungary, twelfth.' and Spain twentyfirst. Those to slip were Poland, fifty-sixth, and one of the Euro Market's problem countries, Brazil, at fifty-second.

Euromoney says its country risk tables measure one. thing "and one thing only. the. reality of the market place.’’

“A country’s placing will depend on a host of factors such as the number of times it taps the market in any one year (the less often it comes the better should be its rating), the skill of its negotiators, its economic performance, its perceived political 'stability (the top 10 countries in our latest rankings are all Western-style pluralistic democracies), its record in servicing debt, the level of existing debt, and traditional relationships.” According to Euromoney, New Zealand in 1980 went to the Euromarket four times, three times at the Government's behest, to raise $690 million. Will New Zealand's tumble down the league tabic affect

its ability to borrow on the Euromarkets?

Official sources in Wellington yesterday said "no.” The league "does'not have any standing at al!’ according to one source. "It is purely for readership.” He pointed out that New Zealand had done comparatively little borrowing on the Euromarket in 1980 and that by itself would have brought about its demise in the Euromoney league. Also, it is understood one loan was organised by a nongovernment organisation at rates not as preferable as those usually negotiated by Treasury. However, the influential magazine's only significance was that it put New Zealand in the 12-strong premier league. The crucial rating which does have a bearing on the ability to borrow is the “triple A” awarded by two leading American credit rating agencies, and constantly surveyed and up-dated. Initially the Government paid for the rating which is effectively the credit agencies’ guarantee on New Zealand bonds traded on American stock markets.

European lenders, although not officially recognising the rating, are also understood to be guided by it