Council credit rating downgraded
Rating agency Standard & Poor's has downgraded Christchurch City Council's credit rating, citing the prolonged earthquake recovery period.
Standard & Poor's credit analyst Claire Curtin said the agency had lowered its long-term credit ratings on Christchurch City Council and the council's subsidiary Christchurch City Holdings to 'AA-' from 'AA'.
"The short-term ratings on both entities were affirmed at 'A-1+' and the outlooks remain negative," she said.
"The downgrades reflect our view that the council's financial management, while still positive, is increasingly being affected by a difficult environment stemming from a prolonged recovery period following the earthquakes in 2010 and 2011.
"Although we consider CCC's financial strategy to be prudent, the degree of control over the reconstruction held by the Crown, rather than by CCC, in our view reduces the council's political and managerial strength."
Curtin said the outlook could be revised to stable when the agency considered there was greater certainty concerning the likely peak of CCC's debt levels.
"This would likely stem from greater clarity on the anticipated total cost of the reconstruction to CCC. Greater confidence that seismic risk had eased would also provide certainty on potential costs."
Council's general manager Corporate Services Paul Anderson said the rating outcome was expected given the additional council debt in the short to medium term.
Council planned to repay this debt through increased revenue from the five-year special earthquake charge
introduced in the 2011/12 Annual Plan and by reducing its non-rebuild project expenditure, he said.
"The council continues to keep tight control on finances as the city works toward recovery. The increased debt the council has committed to is required to support our contribution to the rebuild.
"The downgrade in credit rating will not impact on the council's ability to perform according to its financial strategy," he said.
Christchurch City Holdings chief executive Bob Lineham said the downgrade was likely to have a minor impact on interest costs and will be well within the costs budgeted by the company.
"To a large degree the market has already factored in the downgrade because the credit rating has been on "watch" for the last year," he said.
New Zealand's major banks have a AA- rating.