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Fitch Revises Rating Watch on GM Financial's European Subs to Evolving from Negative
March 30, 2017 / 7:22 PM / 8 months ago

Fitch Revises Rating Watch on GM Financial's European Subs to Evolving from Negative

(The following statement was released by the rating agency) NEW YORK, March 30 (Fitch) Fitch Ratings has revised the Rating Watch on the 'BBB-/F3' Issuer Default Ratings (IDRs) of three European subsidiaries of General Motors Financial (GMF) to Evolving from Negative. The actions are unrelated to, and unaffected by, the recently announced proposal by Greenlight Capital for a dual-class share structure for GM. A complete list of rating actions follows at the end of this press release. On March 6, General Motors Company (GM) announced the sale of its European operations to PSA Group (PSA; 'BB+'/Outlook Stable) for approximately $2.2 billion. As part of this transaction, GMF subsidiaries Opel Bank GmbH, GMAC (UK) Plc, and General Motors Financial International B.V. (GMI) are expected to be sold to a joint venture (JV) 50% owned by Banque PSA Finance and 50% owned by BNP Paribas Personal Finance, a wholly-owned subsidiary of BNP Paribas (BNPP; 'A+'/Outlook Stable). The sale is subject to various regulatory approvals but is expected to close by the end of 2017. GMF's IDRs and senior debt ratings are unaffected by the announced sale of GM's European operations. These ratings remain equalized with those of GM, reflecting Fitch's view that GMF remains core to GM's remaining operations based on actual and potential support provided to GMF from GM, an increasing percentage of GMF's earning assets related to GM, and strong financial and operational linkages between the companies. The Rating Watch Evolving does not extend to GMI's Euro Medium Term Note Programme, as it is guaranteed by GMF until the notes are fully repaid. KEY RATING DRIVERS - IDRs The Rating Watch revision incorporates additional information obtained by Fitch with respect to the funding structure of the acquiring entity and Fitch's view that BNPP is likely to take a prominent role in operating and supporting the JV, both of which would likely support a rating upgrade in the event the transaction is consummated. On the other hand, GM's agreement to sell its European finance subsidiaries indicates that these entities are no longer core to the company. GM has also indicated that if the sale of the European finance subsidiaries with PSA is not consummated, it will seek to wind down the European finance subsidiaries. As such, were the transaction not to close, Fitch would likely downgrade the IDRs of the three European subsidiaries to at least 'BB+'. The Rating Watch Evolving reflects the possibility of a rating upgrade or downgrade. It is Fitch's understanding that BNPP, which is expected to consolidate the JV's operating results for financial reporting purposes, will maintain significant influence over the JV's operations and may provide liquidity and funding support to it. While BNPP's investment in the JV is consistent with its broader strategic objectives to expand its auto finance footprint across Europe, the GMF subsidiaries would be expected to be rated several notches below the IDR of BNPP given its 50% ownership and the fact that the other owner will have a significant influence on the JV's operations, the JV's relatively small size in relation to the bank's consolidated operations, and potential regulatory restrictions on capital flowing to the JV. RATING SENSITIVITIES - IDRs Fitch expects to resolve the Rating Watch at the time the transaction closes. If the transaction closes and the financial terms and strategic fit with the broader BNPP are consistent with Fitch's current understanding, the ratings would likely be upgraded. Negative rating momentum could result from a failure to close the sale of GMF's European subsidiaries while still closing the sale of GM's European operations. In this instance, GMF has indicated it would wind down GMF's European subsidiaries, which would likely cause Fitch to characterize these subsidiaries as non-core, and result in a downgrade to at least 'BB+'. Prior to the close of the transaction, negative rating pressure could be driven by a downgrade of the ratings of GM and GM Financial. Also prior to the close of the transaction, positive rating momentum on the IDRs is viewed as highly unlikely even in the event GM and GMF's IDRs were to be upgraded. This would reflect the uncertain state of the European subsidiaries' ultimate ownership structure and the fact that the European subsidiaries are no longer core to GM. Fitch has revised the Rating Watch on the following ratings to Evolving from Negative: Opel Bank GmbH --Long-Term IDR 'BBB-'; --Short-Term IDR 'F3'. GMAC (UK) Plc --Long-Term IDR 'BBB-'; --Short-Term IDR F3'. General Motors Financial International B.V. --Long-Term IDR 'BBB-'. Contact: Primary Analyst Michael Taiano, CPA Director +1-646-582-4956 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Jared Kirsch, CFA Associate Director +1-212-908-0332 Committee Chairperson Doriana Gamboa Senior Director +1-212-908-1865 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Additional information is available on Applicable Criteria Global Non-Bank Financial Institutions Rating Criteria (pub. 10 Mar 2017) here Additional Disclosures Solicitation Status here Endorsement Policy 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 WEB SITE AT <a href="">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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT <a href="">HTTPS://WWW. FITCHRATINGS.COM /SITE/REGULATORY. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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