BFSR affirmed at C, short-term debt rating affirmed at Prime-2; deposit ratings of A3/Prime-2 assigned; short-term rating of Lease Plan New Zealand Limited withdrawn
Paris, January 07, 2011 -- Moody's Investors Service has affirmed today LeasePlan Corporation (LeasePlan)'s
A3 long-term debt ratings, its C bank financial strength
rating (BFSR), its Baa1 subordinated debt rating and its Prime-2
short-term debt ratings. At the same time, the agency
has also revised the outlook to stable from negative. In addition
Moody's has assigned local currency long-term and short-term
bank deposit ratings to LeasePlan, of A3/Prime-2 respectively.
RATINGS RATIONALE
The change in outlook reflects Moody's belief that the heightened
level of risks resulting from the wholesale funding profile of the institution
has stabilized, reflecting liquidity actions taken by management
and improved capital market conditions. LeasePlan's ongoing
reliance on confidence-sensitive wholesale funding nevertheless
remains a constraint on its ratings.
Furthermore, the previously-assigned negative outlook also
incorporated Moody's concerns of the potential impact a prolonged
depreciation of second-hand car market prices would have on LeasePlan's
residual value risks. In this respect, Moody's notes
the ability of the bank to partly mitigate risks through a set of factors
implemented since late 2008/early 2009 as well as more favorable market
conditions than earlier anticipated by the rating agency. Lastly,
the revision of the outlook to stable also reflects the resilience of
LeasePlan's commercial operations in a depressed macro-economic
environment in most of the countries where the institution operates.
In Moody's view, LeasePlan's leading position in a number
of developed markets is one of its key credit strengths.
IMPROVED LIQUIDITY MANAGEMENT AND REDUCED RELIANCE ON OUTSIDE LIQUIDITY
SUPPORT
While remaining predominantly wholesale funded, LeasePlan is in
our view less dependent on external liquidity support than in March 2009,
through the combined effect of measures taken by the institution and the
ability of the institution to return to senior unsecured and unguaranteed
markets.
The abovementioned measures include the increase of committed liquidity
lines which have enabled the institution to secure a larger part of its
funding. These facilities consist of a €1.475 billion
line committed from its 50% ultimate shareholder Volkswagen AG
(A3/Prime-2 stable) maturing in December 2013 and a committed line
from a syndicate of 16 banks which was renewed in December 2010 for 3
years and increased to €1.475 billion (from €1 billion).
Another positive development is the set up of a retail internet deposit
facility from February 2010, which has attracted up to €1.7
billion as per November 2010. We believe that internet based deposits
add to the diversification of funding sources but caution that they still
represent a small proportion of the total funding and are more volatile
and price-sensitive than traditional branch deposits. In
H1 2010 LeasePlan placed Bumper 3 previously retained notes with external
investors. The remaining retained securitisations also allows LeasePlan
to draw funds from the European Central Bank.
Moody's further notes that the institution has successfully returned
to senior unsecured markets and issued several unsecured notes since it
last issued state-guaranteed notes in May 2009. We also
consider that the matched funding and the short duration of its lease
portfolio are overall positive to the bank's liquidity.
SATISFACTORY CAPITAL BUFFERS AND MITIGATING FACTORS HELP REDUCE RESIDUAL
VALUE AND CREDIT RISKS
In the context of a depressed second hand car market, in late 2008
LeasePlan started taking measures to reduce its exposure to residual value
risk. These actions, coupled with the structural short-duration
of car leases (between three to four years) and a slight improvement of
the market prices (yet still below the pre-crisis level),
have enabled LeasePlan to partly mitigate the effect of a prolonged depression
in the second-hand car market prices.
In Moody's view, older operational lease vintages (originated
up to 2008) are most sensitive to a further decline in second-hand
car market prices in that the residual values set at inception were based
on pre-crisis market prices. Conversely, the contractual
residual value set on most recent vintages (from H1 2009) was based on
more recent and severely depressed market prices, thus containing
lower residual value risks.
Based on our analysis, and given the above factors and capital position,
we believe that LeasePlan is well positioned to absorb a material worsening
in termination losses (stemming from residual value risk).
Factors that would exert negative pressure on the BFSR include a deterioration
of the bank's liquidity and funding profile, a deterioration
of the second-hand car market prices below Moody's own expectations
and an overall weakening of the institution's financial fundamentals
or of its franchise.
SUBSIDIARIES AFFECTED BY THE CHANGE IN OUTLOOK
LeasePlan subsidiaries which are also affected by this rating action are
listed below:
- LeasePlan Finance NV (Dublin Branch): long-term
and short-term backed ratings affirmed at A3 and Prime-2
respectively and outlook revised to stable from negative
-LeasePlan Australia Limited: backed senior unsecured rating
affirmed at (P)A3, backed commercial paper affirmed at Prime-2
and backed other short-term program affirmed at (P)Prime-2
and outlook revised to stable from negative
WITHDRAWAL OF RATING FOR LEASE PLAN NEW ZEALAND LIMITED
Moody's Investors Service has also withdrawn the short-term rating
of LeasePlan New Zealand Limited.
LeasePlan New Zealand was a co-issuer under LeasePlan Corporation
N.V.'s USD3 billion Euro Commercial Paper (ECP) programme
between 2003 and 2008 and under the USD1 billion ECP programme between
1997 and 2003. LeasePlan Corporation N.V. acted as
guarantor on LeasePlan New Zealand's notes.
As LeasePlan New Zealand is no longer a co-issuer under these programmes,
Moody's has withdrawn its rating.
Moody's should have withdrawn its rating when LeasePlan New Zealand
ceased to be a co-issuer in 2008. However, the rating
remained outstanding and, in January 2010, Moody's mistakenly
upgraded it to Prime-1.
Given that the notes were primarily rated on the basis of LeasePlan Corporation's
guarantee, the rating should have been Prime-2 prior to its
withdrawal.
LeasePlan New Zealand has no outstanding debt rated by Moody's.
PREVIOUS RATING ACTIONS AND METHODOLOGIES
The last rating action on LeasePlan was on 18 March 2009, when Moody's
confirmed LeasePlan's C BFSR, A3 long-term debt rating
and Baa1 long-term subordinated debt rating and revised the outlook
to negative.
The principal methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, and
Incorporation of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology published in March 2007.
Based in Almere, the Netherlands, LeasePlan's pre-provision
profit (PPP) was EUR132 million in H1 2010, up by 31% from
EUR100 million in H1 2009 (source: Moody's). LeasePlan had
total assets of EUR17.8 billion at the end of June 2010,
up by 4% from EUR17.2 billion at the end-December
2009. At end-June 2010, its lease portfolio (including
receivables from customers and property and equipment under operational
lease and rental fleet) stood at EUR13.7 billion (year-end
2009: EUR13.6 billion) and its Tier 1 ratio stood at 13.6%
(year-end 2009: 12.8%) under the Basel II advanced
approach.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with amendments resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Paris
Stephane Herndl
Analyst
Financial Institutions Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt am Main
Carola Schuler
MD - Banking
Financial Institutions Group
Moody's Deutschland GmbH
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SUBSCRIBERS: 44 20 7772 5454
Moody's France SAS
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Moody's affirms LeasePlan's A3 rating, outlook revised to stable
