With asset quality continuing to deteriorate and the announcement of a capital injection that was deemed inadequate to maintain the credit rating, S&P lowered the long-term rating assigned to South Canterbury Finance to 'BB' from 'BB+' and left the rating on CreditWatch Negative. Moreover, S&P noted the now diminished prospects for further shareholder support but acknowledged that without what has been forthcoming, the rating would have been lowered by more than one notch.Liquidity and asset quality are now the key issues for South Canterbury and should either deteriorate further, more rating downgrades are likely. For liquidity South Canterbury is dependent upon its debenture investors, who, S&P notes, have been reasonably supportive to date.However, South Canterbury is quite likely facing crunch time. Investors who have funds maturing in the short term are going to be well aware that if they rollover their investment beyond October this year, their investment will be guaranteed by the New Zealand government but they may have to call on the New Zealand government to honour its guarantee. In the meantime, South Canterbury is likely to become ineligible for a continuation of the government's guarantee beyond October, because its credit rating is now at the minimum level acceptable for continuation of guarantee support and the rating is on Credit Watch with negative implications. Credit Watch with negative implications means there is a 50 per cent chance of the rating being lowered within three months.If South Canterbury's credit rating is lowered further, it seems likely that many debentures maturing after October will not be rolled over, and this will greatly exacerbate South Canterbury's liquidity problems.