DFC rated AA by U.S. agency

Press, 14 January 1986, Page 30

DFC rated AA by U.S. agency

PA Wellington The international rating agency, Standard and Poors, has assigned an AA longterm bond rating to the Development Finance Corporation. It is the first New Zealand entity, other than the Government, to obtain such a rating. The rating relates to a 10year, JUSIOOM Eurobond issue, guaranteed by DFC, last July.

The DFC deputy general manager, Mr Murray Smith, said assignment of a “double A” had put the corporation on the same level of security and creditworthiness as major United States and British banks such as Citicorp, Chemical Bank, Barclays, and National Westminster. “This achievement is all the more remarkable given that these ratings have been

obtained without a Government guarantee.” A rating by Standard and Poors, or Moodys Investment Services, enables international bond investors to quickly ascertain a corporation’s creditworthiness without undertaking their own detailed evaluation, he said.

Rating by either of these agencies has become the international standard of evaluation.

“For any internationally oriented bank, it is becoming increasingly important to obtain a credit rating,” he said.

“DFC’s rating was only achieved after Standard and Poors had thoroughly evaluated the corporation’s quality of lending, along with its ability to manage interest rate, foreign exchange and liquidity risk.”

Mr Smith said that Standard and Poors’ premium long-term bond ratings are divided into AAA, AA and A, with further refinement by adding a “plus” or “minus”. The New Zealand Govern-

ment has an AA-plus rating, which creates a ceiling for the country’s banks or corporations. “However, there is only a handful of AAA rated banks throughout the world,” he said.

“Our AA rating will enhance the corporation’s international profile, enabling us to continue to access funds at a competitive advantage, and to undertake sophisticated forms of funding and liability management.”

DFC sources more than 50 per cent of its funds from international markets. It was the first New Zealand corporation to enter the United States commercial paper market and the first New Zealand entity to obtain a short-term commercial paper rating. In addition to arranging various Eurobond issues, DFC has undertaken a wide range of private placement in the Japanese, Middle East and Australian markets. It is also a leader in the interest currency swap market.