Council believes credit rating changes are temporary

International credit rating agency Standard & Poor's is moving Christchurch City Council's rating from AA- to A +.

The new credit rating reflects a changed assessment of the Council's political and managerial strength, the revoking of the Council's building consent accreditation and the perceived risk of future legal action against Council.

General Manager Corporate Services Paul Anderson says the changed credit rating reflects temporary factors the Council is working with the Crown to address.

"We believe this situation is temporary as our management issues will be resolved with time and we are working closely with the Crown to ensure we regain our IANZ accreditation."

"Our financial strategy and our debt levels were not a direct factor in this rating change. Our underlying financial strategy remains unchanged and Standard & Poor's noted this strategy as prudent in its last review.

"Our forecast levels of debt are lower than previously signalled due to the cost-sharing agreement with the Crown."

Standard & Poor's recognised the recently announced cost-sharing agreement as a positive development for the Council.

Mr Anderson says a possible credit downgrade was signalled and factored into the recently signed off Three Year Plan and will not affect the Council's ability to borrow.

The rating change will have a negligible impact on the Council's cost of servicing debt. We would expect it to increase our interest costs by around 0.05 per cent, which is well within the tolerance built in to our financial forecasts," he says.

Corporate and Financial Committee chair Councillor Helen Broughton says "The downgrade is obviously concerning but Standard and Poor's weighs up seven factors in assessing the Council. This change was based on two factors - management changes and contingent liabilities potentially occurring from the loss of building consent accreditation. Five other quantitative factors remain unchanged."

ENDS

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