Broadlands Finance credit rating cut to ‘B’

Broadlands Finance credit rating cut to ‘B’

By Paul McBeth

Dec. 9 (BusinessDesk) – Broadlands Finance Ltd., the auto-financier controlled by Tony Radisich, had its credit rating cut two notches to B by Standard & Poor’s as the post-government-guarantee finance sector gets shakier.

S&P analyst Peter Sikora said the lender, which missed out on securing a strong enough credit rating to get into the extended guarantee scheme, has a “weak liquidity position, vulnerable funding profile and high-risk loan portfolio” which prompted the downgrade. He also put it on a negative outlook. About 60% of the firm’s loans were in default as at Aug. 31, and Broadlands could only manage to get 47% of investors to roll over their cash in the five months through August, according to its prospectus.

“Broadlands’ credit losses have been fairly well managed to date – but its credit profile is moderated by a high-risk loan-receivables portfolio that exhibits a material level of arrears and some single-customer concentration,” Sikora said in a statement.

That makes it the second finance company to teeter since the government’s guarantee ended in October, with the Spencer family’s Equitable Mortgages Ltd. hitting the wall last month.

The lender has cut the size of its balance sheet $6 million to some $34 million since 2008 in response to the tough environment. Shareholder Radisich has had to loan money to the lender to keep its cash-flow going. He committed to the firm until Aug. 20 next year, and will do his best to provide financial support to avoid a default, according to its latest prospectus.

Sikora said Broadlands’ negative outlook reflected the uncertainty over the firm’s ability to manage liquidity and funding, and a shift in focus to commercial lending will increase the concentration of its risk profile.

To avoid further downgrades, Sikora said the firm will need to tap investors for more cash, or find money from other sources to lessen its reliance on Radisich.

(BusinessDesk)

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