FE Investments 'B' Ratings Affirmed, Off CreditWatch On Improved Credit Risk And Capital Sufficiency; Outlook Stable
On 2nd of June, 2016 Standard & Poor Rating Agency “S” removed the potential for negative implications of FE Investments ”FEI” ratings from CreditWatch and affirmed both its
long term and short term issuer credit rating on FEI at ‘B’. The outlook remains as stable. See full report here: Standard__Poor27s___June_Report.pdf
This came on the back of the 20th April, 2016 decision when S placed FEI’s credit rating of B on CreditWatch at risk of being downgraded on the potential increase of credit risk due
to its exposure to Australian based Wi-Fi company, Tomizone limited.
During this interim review period, Tomizone was able to successfully raise new capital through a capital restructure, to
which FEI agreed as part of its ongoing support to the company to restructure its loan of about A$1.7 million to
Tomizone, of which A$1.25 million will be refinanced into non-mandatory convertible notes (the residual represents
personal loans to unnamed directors of Tomizone). S noted that the loan restructure has, in some ways, strengthened FEI's rights as a creditor to Tomizone. S, subsequently lifted its earlier CreditWatch decision.
FEI to whom earns a fee from its lending and underwriting arrangements from commitments for debt securities issued by
third parties and to SME’s like Tomizone; remains dedicated to helping business in New Zealand grow. Evidence of this,
is the agreed restructuring plan that enables Tomizone to pursue is global expansion plans, whilst FEI has achieved a
reduction to its overall credit risk from one of its main debtors.
FEI has a strong operating history in New Zealand since July 2003. It is a non-bank deposit taker (NBDT) operating under
the relevant regulations issued by the Reserve Bank of New Zealand and one of the very few financial providers in the
country that a) survived during the turmoil of the Global Financial Crises which saw the demise of over sixty-seven
finance companies collapses in New Zealand between May 2006 and the end of 2012 and b) continues to hold an external
credit agency rating. S reaffirmation of FEI’s credit rating, is that there is greater certainty of FEI maintaining strong capitalisation to
support its lending activities and took note of FEI’s solid record of injecting additional capital into its finance
company to fund new business growth and to maintain a buffer above its regulatory capital requirements. FEI shareholders
provides the company with a very strong capital levels to absorb a reasonable increase in any credit losses.
S expects that FEI will maintain a risk-adjusted capital (RAC) ratio above 15% in the next two years, therefore remaining
very strong through to March 2018. This is the result of increased capital injections, a slowdown in lending growth
rates and/or exposure to the property sector, and increased focus on lending towards lower-risk cash flow discounting
SME segments.
The S report continues to repeat its exertions on FEI’s sufficient balance sheet flexibility to cover future funding
requirements, manage any unpredictable cash flows, and maintain its ability to attract a consistent stream of retail
debentures with high reinvestment rates. As a result, S has expressed that it is unlikely to lower its rating of FEI in the next year.
This article also serves as an update the NBR article on 22nd April, 2016, in regards to the S ratings announcement on 20th April, 2016.
More can be found about FE Investments and its attractive term deposit interest rates by visiting their website on
www.fei.co.nz