Standard & Poor’s told the NZX from Melbourne last night that following the completion of Vector's acquisition of a 67.2% stake in NGC Holdings it had removed the CreditWatch negative implication from Vector’s rating.
This followed Vector's acquisition of Australia Gas Light’s 66.05% shareholding last December and the subsequent on-market acquisition of a further 1.15%.
Vector’s 67.2% stake in NGC was financed with a combination of a NZ$526m bank acquisition facility and NZ$354.4m of equity bridging finance.
"A major part of the decision to affirm the rating is the assumption that Vector will repay the Pre-IPO Equity Securities equity bridge, either through the proceeds of its IPO or other means, by late 2005," said S & P credit analyst Mark Legge.
“Vector now controls assets that include the low-risk electricity network business, which provide scale and diversity of operations, a robust service area, and current regulatory price path certainty.
“Vector's majority ownership of NGC gives the consolidated group the leading market position in gas distribution and the number two position in gas transmission. The strength of the business profile has been offset by a weaker financial profile, particularly in the short term, due to the increased debt from funding the NGC acquisition."
S & P also re-affirmed NGC's short-term rating of “A-2”, reflecting the creditworthiness of Vector, NGC’s strong market position in gas transmission and distribution; its diversified revenue base; and moderate financial profile.
But Legge cautioned that these strengths were offset by uncertainty in New Zealand's gas market.
The outlook for both companies was stable.