New Merged Group Achieves Investment Grade Credit Rating

5 January 2011

New Merged Group Achieves Investment Grade Credit Rating

Building Society Holdings Limited (BSHL) today welcomed the decision by Standard & Poor’s to assign an Investment Grade credit rating (BBB–, Outlook Stable, short term A3) to its newly formed $2.2 billion financial services and banking(1) subsidiary, Combined Building Society.

The chief executive of BSHL Jeff Greenslade said: “This is a significant endorsement of our plan to bring together these three entities (CBS Canterbury, Southern Cross Building Society and MARAC) and to create a new and stronger entity that will be listed on the NZSX(2) and that can offer compelling services to our target customers – namely SMEs, rural businesses and NZ families.”

“Standard & Poor’s swift approval means that we can now move forward with confidence and execute our strategies – a key one being an application for bank registration.”

The decision by Standard & Poor’s follows the successful transfer of the assets and engagements of CBS Canterbury and Southern Cross Building Society and the shares in MARAC to Combined Building Society. The Crown Guarantee for Combined Building Society has also now become operative.

In its statement Standard & Poor’s said the merger has created a larger and more-diversified financial institution, with a sound funding and liquidity position and adequate capital adequacy.

“Consequently, the ratings reflect our favourable view of Combined's business risk profile, which is supported by its small but good market position in the New Zealand nonbank deposit-taker sector, and its good business and geographic diversity.”

“In our view, the financial risk profile of the company receives significant support from the company's sound funding and liquidity position, capital adequacy, and improved financial flexibility.”

“As a merged group, Combined’s funding position is stronger than the three individual companies, stemming from its anticipated better access to retail and wholesale funding. It now has access to an expanded debenture-investor market, and a higher banking and securitisation facility,” the ratings agency said.

- Ends –

(1) None of Combined Building Society, Building Society Holdings Limited, CBS Canterbury, Southern Cross Building Society, Pyne Gould Corporation Limited or MARAC Finance Limited is a registered bank under the Reserve Bank Act 1989. The ultimate intention of the merger parties is that Combined Building Society will become a registered bank. Obtaining bank registration is subject to satisfaction of the Reserve Bank’s registration requirements.

(2) An application has been made to NZX Limited for permission to list Building Society Holdings Limited, and all requirements of NZX Limited that can be complied with on or before 5 January 2011 have been duly complied with. However, NZX Limited accepts no responsibility for any statement in this announcement. NZX Limited is a registered exchange regulated under the Securities Markets Act 1988.

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