Quake city's credit rating drops

By Jarrod Booker

Photo / Mark Mitchell
Photo / Mark Mitchell

Christchurch City Council's holding company has had its credit rating downgraded.

Ratings agency Standard and Poor's says it's AA+ rating dropped to AA due to the fall out from the city's earthquakes on the local economy and the city's rating base.

Holding company chief executive Bob Lineham says the downgrade will have no impact on the company's ability to source debt financing and very little impact, if any, on the cost of borrowing.

Insurance costs were cited as a reason for the credit rating drop.

Christchurch mayor Bob Parker told Radio New Zealand the decision to lower the council's rating was 'measured' and realistic given the city's precarious position in the wake of the February 22 earthquake.

He said he was hopeful the city would eventually regain its former rating.

"It's happened, it's measured and I think we'll accept with the passage of time we'll regain the position that we were in, which was a great position."

Mr Parker said the risk of a further credit rating downgrade hinged on whether more large earthquakes hit Christchurch in the near future.

"I don't think that's going to occur but then again I'm one of life's optimists."

Meanwhile ballooning insurance costs caused by the Christchurch earthquakes are leaving some major property owners stressing over paying the bills.

Canterbury Racing is facing a fivefold increase in costs from before the first quake in September for its facilities at Riccarton Park racecourse, as the insurance industry reassesses risk in the region.

"We got a bit of a spike straight after the September earthquake, and ... the indications from our broker now are actually quite scary, if not terrifying," said Canterbury Racing chief executive Tim Mills.

Annual insurance costs and levies for the racing club went from about $90,000 before the September quake to about $135,000 after it.

The early indication from the club's broker is that in October, the costs could exceed $450,000.

"We just don't know how we are going to address it," Mr Mills said. "We are at our wits' end.

"We don't have that sort of money lying around just to pay insurance. I suppose we have gone through the human disaster and the human emotions of the earthquake ... and now there is the economic issues."

The three stands at the racecourse - the oldest built in 1922 - were largely unscathed by the quakes.

Prominent property owner Antony Gough said he was lucky to have renewed his insurance on his central Christchurch properties just before the February 22 quake. But he was still looking at excesses rising in some cases from $2500 to $250,000 or more.

His premiums are also likely toballoon on properties not making money because they are in the cordoned-off central-city red zone.

"There is a huge squeeze coming on everyone," Mr Gough said.

The Insurance Council has warned that big overseas backers of insurers have viewed the ongoing quakes with concern.

"There are likely to be long-term and significant changes to insurance in New Zealand when it comes to the writing of policies and covering of risks like earthquake," a council spokesman said.

Christchurch City Council and Waimakariri District Council recently faced the prospect of no insurance for assets and infrastructure because their usual insurer, Civic Assurance, could not offer property insurance after the quakes.

- NZ Herald

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