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Fitch Publishes PEFCO's 'AAA/F1+' Long-Term & Short-Term IDRs; Outlook Stable
November 20, 2014 / 5:23 PM / in 3 years

Fitch Publishes PEFCO's 'AAA/F1+' Long-Term & Short-Term IDRs; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, November 20 (Fitch) Fitch Ratings has published Private Export Funding Corporation's (PEFCO) Long- and Short-Term Issuer Default Ratings (IDRs) of 'AAA/F1+', respectively, with a Stable Outlook. Fitch has also assigned a 'AAA' rating to PEFCo's secured debt and an 'F1+' to its commercial paper. Fitch's ratings and Stable Outlook are underpinned by PEFCO's relationship with export agencies such as U.S. Export Import Bank (Ex-Im) and Overseas Private Investment Corporation (OPIC) that are backed by the U.S. Treasury. A full list of rating actions follows at the end of this press release. Fitch's Support Rating and Stable Outlook reflect Fitch's expectation of an extremely high level of government support in the near- to intermediate-term. PEFCO's LT IDR is at its Support Rating Floor of 'AAA' and therefore is not likely to be downgraded unless Fitch changes its view of support. These linkages are further articulated in Fitch's report 'Rating Linkages to the U.S. Sovereign Rating', dated July 18, 2011, and Section III.1.4 of Fitch's 'Global Financial Institutions Rating Criteria', dated Jan. 31, 2014. KEY RATING DRIVERS - IDRs, SECURED DEBT, SUPPORT RATINGS, SUPPORT RATING FLOORS PEFCO's ratings are directly linked to the U.S. sovereign rating, based on Fitch's view on U.S. government's financial support. PEFCO is a privately owned corporation that was created with the support of U.S. Treasury and Ex-Im. In Fitch's view, PEFCO presents minimal credit risk as all loans made by PEFCO are guaranteed or insured by Ex-Im Bank or other U.S. government institutions such as Overseas Private Investment Corporation (OPIC) whose obligations are backed by the full faith and credit of the U.S. government. A key rating driver and Fitch's rationale for aligning PEFCO's ratings to the U.S. sovereign rating is PEFCO's guarantee agreements with Ex-Im. Under explicit agreements between Ex-Im and PEFCO, Ex-Im guarantees the principal and interest of all covered loans held by PEFCO and the interest payments on senior secured debt issued by PEFCO. All secured debt issued by PEFCO is collateralized by loans guaranteed by Ex-Im is rated 'AAA'. PEFCO's Support Rating of '1' and Support Rating Floor of 'AAA' reflect Fitch's view that there is an extremely high propensity of sovereign support through Ex-Im. Ex-Im is chartered by the U.S. Congress, and its charter's reauthorization is subject to a vote in June 2015. Fitch's ratings incorporate the expectation that Ex-Im will be reauthorized. In Fitch's view, Ex-Im plays an important and long-lasting policy role that would be difficult to transfer; and in addition to full funding guarantees, government backing for Ex-Im has been long term and strategic. While Fitch notes that the recent debate has implied a weakening of Congressional support for Ex-Im's charter, PEFCO's Ratings and Stable Outlook incorporate the unlikely scenario Ex-Im's charter is not renewed. In Fitch's view, the probability of government support of PEFCO remains extremely high irrespective of Ex-Im's re-authorization due to the explicit sunset clauses embedded in existing agreements. If Ex-Im is shut down, all of Ex-Im's outstanding guarantees would remain in effect. Due to the high level of reputation risk to US sovereign debt, Fitch does not foresee a scenario where the U.S. government would not honor Ex-Im's existing obligations to PEFCO's secured note holders. Per Fitch's rating criteria, the PEFCO's Short-Term IDR of 'F1+' corresponds to its Long-Term IDR of 'AAA' and reflects the view that PEFCO has the highest short-term credit quality. Notwithstanding expected government support, PEFCO's liquidity profile benefits from a high level of cash and liquid securities, stable earnings, contingent sources of funding, and unencumbered assets that could comfortably support a stable and practicable wind down, if necessary. RATING SENSITIVITIES - IDRs, SECURED DEBT, SUPPORT RATING & SUPPORT RATING FLOOR As discussed, Fitch ratings incorporate the expectation that Ex-Im's charter will be re-authorized, but an unexpected expiration of Ex-Im's charter would not in and of itself result in a negative credit action. However, an unanticipated shift in PEFCO's fundamental business model towards non U.S. government guaranteed lending or issuance of long-term unsecured funding would likely alter Fitch's view of support and result in negative rating actions. The rating actions are as follows: Private Export Funding Corporation --Long-term IDR 'AAA'; Outlook Stable; --Short-term IDR 'F1+'; --Secured debt 'AAA' --Commercial Paper 'F1+' --Support '1'; --Support floor 'AAA'. Contact: Ryan Doyle Director +1-212-908-9162 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Christopher Wolfe Managing Director +1-212-908-0771 Committee Chairperson Meghan Neenan, CFA Senior Director +1-212-908-9121 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (Jan. 31, 2014); --'Fitch Affirms United States at 'AAA'; Outlook Stable' (March 21, 2014); --'Rating Linkages to the U.S. Sovereign Rating' (July 18, 2011). Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Rating Linkages to the U.S. Sovereign Rating here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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