It seems that Pyne Gould Corp (PGC) is not happy with the decision taken by Standard & Poor's - that of lowering the credit rating of its finance company Marac. The decision was described as unexpected and disappointing by the PGC.

A decrease in the long-term rating was seen to BB plus from BBB minus. A negative outlook is held on the rating, which means there is a one-in-three likelihood of a downgrade within the next two years.

The intention of PGC is to convert Marac into a bank. As of now, Marac concentrates on plant and equipment and vehicle financing and has stopped lending to property developments.

According to PGC chairman Sam Maling, steps had been taken to strengthen Marac's position, including the recent appointment of Jeff Greenslade as chief executive.

PGC - which had forwarded that it expects to raise capital - as a group had embarked on a range of structural initiatives.

It was in the mid-September that the details of a capital rising were expected, following the annual result announcement on August 28.

It was noted by S&P that the plan to purchase impaired property loan assets of about $160 million at face value from Marac by PGC, reduced its exposure to the property development sector.

However, it did say that deterioration in asset quality in recent months was outside its tolerances of a BBB minus rating.

Analyst Derryl D'silva expressed, "The prospects are for further growth in non-performing assets given the continued softening in the New Zealand economy."

S&P, which does not rate PGC, concluded: "We retain our view that Marac is one of the stronger finance companies in New Zealand, despite the company's recent asset- quality pressures."