PIR rejects criticisms over Bridgecorp rating

Australian credit ratings agency Property Investment Research (PIR) has been criticised within New Zealand’s financial planning sector for having given failed property group Bridgecorp an investment grade rating.

The criticism has been rejected by PIR, which claims such suggestions are not an accurate reflection of the situation.

One leading New Zealand planner claimed the rating was partly to blame for New Zealand planners being responsible for an estimated 40 to 60 per cent of Bridecorp’s losses of up to NZ$600 million in funds from an estimated 18,000 small investors.

David Greenslade, managing director of Strategi, which specialises in creating and servicing dealer group networks in New Zealand, said it was inevitable that some planners invested in Bridgecorp.

“This would have occurred due either to a mistaken belief in the solidity of Bridgecorp as a company, or an over-reliance on the ratings and research published by the likes of PIR out of Australia.

“Right up until the collapse of Bridgecorp, the company had what PIR deemed as an investment grade rating,” he told Money Management.

Greenslade went on to qualify his comments by describing PIR’s Bridgecorp rating as a “nothing in many respects because of all the disclaimers it carried”.

He acknowledged that some of Strategi’s affiliated planners were involved in Bridgecorp, but emphasised that Bridgecorp was “never on our recommended list and [Strategi] never endorsed it”.

He said there’s “no public knowledge” of how much Bridgecorp’s business came from planners, but said investments “would have been funnelled in some shape or form through smaller, independently-owned practices, but also through a few chains”.

PIR director Mark Wist responded that there were “some anomalies and misunderstandings” in the criticism levelled at the ratings agency.

“Any suggestion that right up until the receiver’s appointment we were giving Bridgecorp an investment grade rating isn’t an accurate reflection of the situation.

“We did a point-in-time evaluation ,” he said, and compared this methodology to Standard & Poor’s, which does “continuous monitoring” for ratings purposes.

“(PIR ratings) last for a period of time, but, of course, things change over time, just as occurred with Basis Capital and S&P, and Enron and S&P.”

Wist said the point-in-time methodology was used to evaluate vehicles in both the New Zealand and Australian operations.

Wist said PIR was not mandated to evaluate Bridgecorp as a group, which gave it limited opportunity to investigate.