Tranz Rail move puts focus on credit rating

By PAM GRAHAM

Tranz Rail has jeopardised the removal of a downward indicator on its Standard & Poor's credit rating by looking into shifting its interisland ferries to Clifford Bay.

Parvathy Iyer of S&P said Tranz Rail had intensified pressure on its rating by looking at Clifford Bay even though it reported a satisfactory half-year result.

Media reports of a buyback of the network were also under consideration, he said.

"I think we have to take these factors also into consideration as to what is going to be the future role of Tranz Rail."

Tranz Rail chief financial officer Wayne Collins said the issue of Clifford Bay was hardly of moment to anyone because all the company had done was appoint ABN Amro to look at it.

Moody's took Tranz Rail off negative creditwatch after the company held a rights issue and renegotiated its debt with banks last year. The company had to find money to provide security to leaseholders and pay back banks after it was downgraded to junk last year.

But S&P has the company on "creditwatch negative", which means the rating is under constant surveillance. It plans to remove it from constant surveillance within four weeks.

"It is possible that the company could remain at the same rating level and the outlook could go to negative," Iyer said. "That means that over the next one to two years there are some things that are going to happen which could place pressure on the rating.

"In the middle of December there were a lot of issues which neither we nor the market had a clear idea about. Those issues have been resolved. What is unknown now is the strategy of the company going forward."