Frankfurt am Main, May 28, 2020 -- Moody's Investors Service, ("Moody's") has
today confirmed Fiat Chrysler Automobiles N.V.'s (FCA)
Ba1 corporate family rating (CFR), Ba1-PD Probability of
default rating as well as its Ba2 instrument ratings. The outlook
on all ratings changed to developing from ratings under review.
This rating action concludes a review for direction uncertain that began
on March 25, 2020.
A full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
FCA's Ba1 rating reflects Moody's view that the company's
liquidity position affords it the capacity to fund sizable cash requirements
that might arise under a potentially extended downturn in the global automotive
market as a result of the coronavirus pandemic. As of March 31,
2020, FCA's liquidity profile is considered good, underpinned
by €12.3 billion in reported cash, cash equivalents
and current debt securities, as well as the cash resulting from
the drawing of its €6.3 billion committed revolving credit
facilities (RCFs) in April 2020, and a new €3.5 billion
incremental bridge credit facility syndicated in April 2020 which remains
undrawn as of today. The maturity of a tranche of the group's
main syndicated RCF was further extended in March 2020 with €3.1
billion maturing in April 2023 (with a 1-year extension option
available) and €3.1 billion in March 2024.
Additionally, FCA is reportedly in talks with the Italian government
to obtain a guarantee from SACE (the state-owned credit insurer)
on a credit line of up to €6.3 billion under the recently
enacted Liquidity Decree.
The automotive downturn brought on by the coronavirus will cause a pronounced
weakening in FCA's credit metrics. We expect that during
2020 FCA's Moody's adjusted EBITA margin could fall below
1%, compared with 5.1% in 2019. However,
FCA should be able to restore its metrics to levels more appropriate for
its Ba1 rating by 2022. We believe that the group's global
footprint and in particular its strong position in North America and Latin
America will be key drivers of a recovery after 2020.
Moody's forecasts for the global automotive sector a 20%
decline in unit shipments during 2020, with a steep year-over
year contraction in the second and third quarters followed by a modest
rebound in the fourth quarter. We expect 2021 industry unit sales
to rebound and grow by approximately 11%. However,
future demand for vehicles could be weaker than our current estimates,
the already competitive environment in the auto sector could intensify
further, and FCA could encounter greater than expected headwinds
in the recovery of its financial and credit metrics than currently anticipated.
The developing outlook balances the potential for a substantial strengthening
of the balance sheet following the announced merger with Peugeot SA,
which could be credit positive, with the risk that a more severe
or prolonged downturn in the global auto industry could pose for FCA's
standalone credit worthiness. Key factors in this respect include
(1) the final terms of the merger agreement with PSA, which we expect
to become available over the course of 2020 and the groups operating performance
through these unprecedented times, including self-help measures
to safeguard its balance sheet, which was strong in the context
of its Ba1 rating ahead of the crisis.
ESG RISK
The widening spread of the coronavirus outbreak, deteriorating global
economic outlook, falling oil prices, and asset price declines
are creating a severe and extensive credit shock across many sectors,
regions and markets. The global automotive industry is one of the
sectors that will be most severely impacted by the outbreak. The
vulnerability of FCA's products to a potentially steep downturn
in demand heightens the importance a healthy liquidity profile.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
FCA's rating could be downgraded during the next eighteen months
if the company is unable to establish a clear trajectory for achieving
the following metrics: (1) a Moody's adjusted EBITA margin remaining
below 4%, (2) return to a sizable positive free cash flow
generation following the anticipated material cash consumption in the
current year of approximately €6 billion and (3) reduce the temporarily
elevated Moody's-adjusted debt/EBITDA anticipated for the
current year again to well below 3.0x.
The possibility of an upgrade of the ratings is limited in the near term.
With respect to the merger with PSA, positive rating pressure could
build once we have more clarity on timing and financial implications of
the merger transaction as well as comfort that the combined entity can
sustain credit metrics commensurate with an investment grade rating during
a period of potentially weaker market conditions.
Qualitatively, upward pressure on FCA's rating could materialize
if the company is able to demonstrate a successful and sustainable improvement
in its competitive position outside the North America region, mainly
Europe and China. Furthermore, the company needs to implement
and successfully execute a profitable and resilient competitive position
for its Alfa Romeo and Maserati brands. An upgrade would also require
sustainability in FCA's current operating profitability and cash flow
generation, even if market conditions were to weaken in the US and
Europe, as well as its track record in successfully addressing tougher
emission standards without being a leader in supporting technologies.
Quantitatively, an upgrade could occur if FCA were able to achieve
(1) a Moody's-adjusted EBITA margin sustainably above 6%,
(2) a consistently positive and robust free cash flow without compromising
on its capital expenditures and R&D expenses needed to achieve emission
targets, to manage the transition to alternative fuel vehicles and
new drivetrain technologies as well as autonomous vehicles and (3) keeping
its leverage based on Moody's-adjusted (gross) debt/EBITDA sustainably
below 2.0x.
LIST OF AFFECTED RATINGS:
..Issuer: Fiat Chrysler Automobiles N.V.
Affirmations:
....Other Short Term, Affirmed (P)NP
Confirmations, previously placed on review with direction uncertain:
.... LT Corporate Family Rating, Confirmed
at Ba1
.... Probability of Default Rating,
Confirmed at Ba1-PD
....Senior Unsecured Medium-Term Note
Program, Confirmed at (P)Ba2
....Senior Unsecured Regular Bond/Debenture,
Confirmed at Ba2
Outlook Actions:
....Outlook, Changed To Developing From
Rating Under Review
..Issuer: Fiat Chrysler Finance Europe SA
Affirmations:
....BACKED Other Short Term, Affirmed
(P)NP
Confirmations, previously placed on review with direction uncertain:
....BACKED Senior Unsecured Medium-Term
Note Program, Confirmed at (P)Ba2
....BACKED Senior Unsecured Regular Bond/Debenture,
Confirmed at Ba2
Outlook Actions:
....Outlook, Changed To Developing From
Rating Under Review
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Automobile Manufacturer
Industry published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062773.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Falk Frey
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Anke Rindermann
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
