S&P Lowers New Zealand’s Geneva Finance Ratings to ‘D’

October 18, 2007

Standard & Poor’s Ratings Services has lowered its long-term counterparty credit ratings on New Zealand finance company Geneva Finance Ltd. to ‘D’ from ‘B-/Watch Dev/–‘. S&P also lowered the insurer financial strength and counterparty credit ratings on Geneva’s sister company Quest Insurance Group Ltd. to ‘CC’ from ‘CCC+’ and assigned the ratings a negative outlook. Concurrently S&P withdrew its CreditWatch with developing implications on the ratings on Geneva and Quest.

S&P said it had taken the rating actions following Geneva’s revelation that it has “reached an agreement with the trustee and BOS International to put forward a moratorium proposal to Geneva’s investors. Under the proposal, there will be nonpayment of debenture redemptions due to Geneva’s investors from Oct. 15, 2007.”

Geneva has advised investors that all classes of investment maturities are to be extended by six and a half months, and had scheduled a meeting of investors on Nov. 5, 2007 to consider an “extraordinary resolution” to that effect.

“A payment default has occurred with Geneva’s nonpayment of debenture redemptions upon the due date,” explained S&P director Gavin Gunning. “Under these circumstances the only available course of action to Standard & Poor’s is to lower the long-term counterparty credit rating on Geneva to ‘D’.” He added that S&P’s issuer credit ratings do “reference the capacity and willingness of an issuer to make repayment of principal and interest-in full and on time.”

S&P also detailed the rating actions it has taken since “Geneva’s funding and liquidity difficulties” became known in September. The rating agency said the “next key milestone requiring a review by Standard & Poor’s of its ratings on Geneva is likely to be the extraordinary resolution on Nov. 5, 2007. If the proposals on Nov. 5, 2007, were supported by investors, it is likely that the rating will be raised from ‘D’ to a level commensurate with Standard & Poor’s view regarding Geneva’s financial strength at that time. On the other hand, should the proposals be rejected by investors, Standard & Poor’s believes that it is likely that Geneva’s trustee will proceed with enforcement actions.”

S&P explained that a ‘D’ rating indicates a payment default, and is used “when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period.”

Source: Standard & Poor’s – www.standardandpoors.com

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