Local Government Funding Agency rating affirmed by S&P at AA+ on Crown backing
The LGFA began issuing bonds to raise funds for local authorities in February 2012.
The Local Government Funding Agency, which sells bonds on behalf of most of New Zealand's local authorities, had its AA+/A-1+ credit ratings affirmed by Standard & Poor's, which cited the likelihood of central government support, strong market position and "exceptional credit quality". The outlook is stable.
The LGFA began issuing bonds to raise funds for local authorities in February 2012, having been established to reduce council borrowing costs by at least 30 basis points. It is the second-cheapest borrower after the central government and currently has about $5.56 billion of bonds on issues at maturities ranging from December 2017 to April 2027. There are 46 councils that participate in its programmes, including 30 shareholding councils.
"The rating affirmation of LGFA reflects our view of the 'extremely high' likelihood that the New Zealand government will provide extraordinary support to the LGFA in a stress scenario," said S&P credit analyst Anthony Walker. The rating also reflected LGFA's stand-alone credit profile of 'aa-', which was due to its sole focus on lending to local governments, very strong market position, exceptional credit quality and increasing borrower base, he said.
Offsetting factors were LGFA's reliance on wholesale funding with some maturity concentration, and borrower concentration in its loan portfolio, S&P said.
(BusinessDesk)
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Local Government Funding Agency rating affirmed by S&P at AA+ on Crown backing
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