Christchurch City credit rating cut over consenting debacle

Christchurch City Council had its credit rating cut one notch and is still on a negative outlook after losing its accreditation to issue building consents.

Global rating agency Standard & Poor’s cut the long and short-term ratings to A+/A-1 from AA-/A-1+ after lowering its assessment of the city’s political and management strength, it said in a statement. The downgrade comes after International Accreditation New Zealand stripped the local authority of its consenting ability from today and after a Crown manager was appointed to oversee issuance.

“The appointment of a Crown Manager reinforces our view that the New Zealand government (the Crown) is driving the reconstruction of the Canterbury region, of which Christchurch is the major city, and raises questions about CCC’s management strength, and whether further issues will emerge,” said credit analyst Claire Curtin.

Christchurch City Mayor Bob Parker has already signalled he won’t seek re-election later this year and chief executive Tony Maryatt has taken leave since the government moved to take control of consenting.

S&P’s Curtin said the council still faces contingent liabilities, and that “legal risk is heightened further as a result of apparent consenting being not in compliance with New Zealand’s building codes.”

The negative outlook, which implies a one-in-three chance of another downgrade over the next two years, reflects the potential for more management and governance issues, potential insurance issues around consenting, the risk of legal action and the risk the council’s debt burden could exceed 180 percent of consolidated revenue.

The Christchurch rebuild is seen as a lynchpin for New Zealand’s economic growth in coming years, with an estimated cost of some $40 billion.

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