Christchurch City Council and the holding company for its investments had their credit ratings cut one notch to AA with a negative outlook by Standard & Poor's, which said damage from the earthquakes had weakened the local economy.
The short-term ratings were affirmed at A-1+.
The earthquakes "have reduced thecouncil's budgetary flexibility and will likely have a negative effect on the local economy in the medium- to long-term," Standard & Poor's credit analyst Claire Curtin said.
Adding further weakness to the city's credit profile was its lack of insurance on most of its undamaged assets. The council's insurance cover expired on June 30 "and while the council is optimistic of securing insurance coverage, the timing and scope of future cover is uncertain," she said.
Lack of cover has significantly increased Christchurch City's contingent liabilities."
The city's credit ratings would be lowered further should the city be struck by another earthquake or aftershocks which damaged uninsured assets.
"We consider that such an event would significantly increase the fiscal pressure on the council, notwithstanding our expectation of strong ongoing support from the New Zealand government," Curtin said.
The rating outlook could be restored to 'stable' if the city is able to secure enough insurance cover.
