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S&P, Moody's consider downgrading Kiwibank's ratings amid potential sale

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S&P, Moody's consider downgrading Kiwibank's ratings amid potential sale

Standard & Poor's Ratings Services and Moody's placedKiwibank Ltd.'sratings on review for possible downgrade after its parent New Zealand PostGroup said it may remove its guarantee on the bank's payment obligations.

New Zealand Post's potential removal of its guarantee comesas part of a possible sale of Kiwibank shares to New Zealand SuperannuationFund and the Accident Compensation Corp. The two government-owned investmentfunds had made indicativeoffers for shares in Kiwibank, but no final deal had been reached.

S&P said April 6 that it placed Kiwibank's A+ long-termissuer credit rating on CreditWatch with negative implications. The ratingagency also affirmed the bank's short-term issuer credit ratings at A-1.

The rating agency could lower Kiwibank's rating to A, with astable outlook, if New Zealand Post decides to terminate its unconditionalguarantee on the bank and shareholding changes are implemented as proposed. IfNew Zealand Post does not proceed with the proposed changes and if there are noother significant proposed changes in the bank's shareholding or guarantee,S&P expects to affirm Kiwibank's current ratings with a stable outlook.

Meanwhile, Moody's said April 7 that it placed Kiwibank'sAa3/P-1 deposit and issuer ratings on review for downgrade. Therating agency also placed the bank's Aa2(cr)/P-1(cr) counterparty riskassessment and "aa3" adjusted baseline credit assessment on reviewfor downgrade. The lender's baseline credit assessment was affirmed at"baa2."

The possible removal of New Zealand Post's guarantee wouldintroduce some uncertainty about the potential for parental support toKiwibank, Moody's said. The rating agency noted, however, that thepotential for government support will remain likely, given that Kiwibank isexpected to remain a government-owned entity, despite the potential change inits ownership structure.

Moody's said it would likely downgrade the bank's issuer anddeposit ratings if New Zealand Post's guarantee is removed. The rating agencyexpects to affirm the ratings with a stable outlook if New Zealand Post decidesotherwise.

S&P and Moody's expect to resolve their respectivereviews in the second half, once New Zealand Post and Kiwibank decide on thepotential sale.

S&P Ratings and S&P Global Market Intelligence are owned byMcGraw Hill Financial Inc.