Wellington, Dec 24 NZPA - There was good news for South Canterbury Finance on the afternoon before Christmas in the form of ratings affirmation from credit rating company Standard & Poor's and a step back from a potential downgrade.

S&P today affirmed South Canterbury Finance's BB plus long term rating and removed it from CreditWatch Negative, where it was placed on September 20. The outlook on the rating is still negative.

South Canterbury Finance chief executive Nigel Gormack said the change in outlook meant the rating had gone from a one in two chance of a downgrade to about a one in three chance of a downgrade.

"It is positive on two fronts. They have affirmed the rating and said there is less chance of you being downgraded in the future," he said.

The company was informed early this afternoon. "It is an independent acknowledgment that we are on the right track," he said.

S&P said the affirmation reflected South Canterbury Finance's success in ameliorating specific concerns. The company had three new independent directors, was accessing the debenture investor market and its audited statements for fiscal 2009 revealed nothing of concern.

A downgrade of the company's credit rating by S&P in August gave investors in the private placement market in the US the right to be repaid $US100 ($NZ142.53) million.

"Our immediate concern is that South Canterbury Finance maintain higher liquidity, leading up to its recapitalisation plans; its failure to do so would likely to lead to the company being downgraded, S&P said.

Negative pressure would abate if South Canterbury Finance was able to moderate liquidity pressures, manage its credit loss experience, eliminate related party investments and successfully restructure and recapitalise its business to a level that is consistent with a BB plus rating level, S&P said.