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Rating Action:

Moody's downgrades Banque PSA Finance's ratings following the downgrade of its parent Peugeot S.A.

16 Apr 2013

Paris, April 16, 2013 -- Moody's Investors Service has today downgraded Banque PSA Finance (BPF)'s standalone Bank Financial Strength Rating (BFSR) to D from D+, equivalent to a baseline credit assessment (BCA) of ba2 from ba1. Moody's has also downgraded the bank's long-term debt and deposit ratings to Ba1 from Baa3, and its short-term debt and deposit ratings to Not Prime from P-3. The outlook on the BFSR and the long-term ratings is now stable.

Consequently, the bank's subordinated and junior subordinated debt program ratings were downgraded to (P)Ba3 from (P)Ba2 and to (P)B1 from (P)Ba3 respectively and their outlooks revised to stable. The ratings of subsidiaries of BPF that are fully backed by BPF have also been downgraded accordingly.

These actions, reflecting the inherent credit linkages within the group, follow the downgrade of BPF's parent Peugeot S.A. (PSA; B1, stable) and conclude Moody's review initiated on 19 February 2013, that was triggered by the review on PSA. For further details on PSA's rating action, please refer to the press release "Moody's downgrades Peugeot to B1; outlook stable", published on 11 April 2013.

The EUR1.2 billion government-guaranteed senior unsecured debt securities due 2016 are unaffected by today's rating actions and remain rated Aa1, negative. These debt securities benefit from a guarantee by the French government that complies to a large extent with the principles of credit substitution described in "Moody's Identifies Core Principles of Guarantees for Credit Substitution", 11 November 2010. Therefore, their ratings are aligned with that of France (Aa1, negative).

Please refer to the end of this press release for a list of affected ratings.

RATINGS RATIONALE

Given the intricate strategic, commercial and financial ties to its parent, Moody's considers BPF's creditworthiness to be inherently linked to that of PSA. Nevertheless, Moody's believes that BPF's standalone credit strength is superior to its industrial parent and positions the bank's BCA two notches above PSA's senior debt rating. This reflects a range of mitigating factors, including good capitalisation levels, sound profitability and a greater degree of asset and liability matching than those of traditional retail and commercial banks. Despite the challenges faced by PSA, the bank has been able to maintain healthy margins, and has successfully limited the impact of the recent decline in car sales by increasing its penetration rate. Moreover, Moody's notes that unlike many other vendor finance companies, BPF has a banking license, and for this reason it is subject to similar regulatory standards as other credit institutions and to ongoing supervision. This oversight, together with access to central bank refinancing facilities, provides a certain level of protection to creditors.

However, Moody's believes that BPF's rating is eventually constrained by its lack of business diversification and inherent credit linkages with its lower-rated industrial parent, as its activities are exclusively linked to those of PSA. BPF provides vehicle financing to end-users and car dealers in broad geographical areas, but its activities are limited to PSA's brands. As a consequence, volume declines at the manufacturer has resulted in lower activity levels for the bank. Moody's believes that a weakening of PSA's sales could also impact the credit standing of car dealers, a substantial lending exposure for BPF at 26% of loan book as of year-end 2012. The downgrade and weakening credit profile of PSA has therefore prompted Moody's to downgrade BPF's BFSR.

Moody's has also today downgraded BPF's long-term debt and deposit ratings to Ba1 from Baa3. In Moody's view, the support plan announced by PSA on 24 October 2012 and temporarily approved by the European Commission on 11 February 2013 demonstrates the willingness of French authorities to support BPF as a means of stabilizing the franchise of PSA, given the latter's economic relevance as a major car manufacturer and employer in France. As a consequence, Moody's assigned one notch of systemic uplift to BPF's long-term ratings on 14 November 2012. However, Moody's believes that there would inevitably be limits on the willingness of the authorities to support BPF's bondholders, viewing the limited size and lack of systemic importance of the bank. Therefore, Moody's sees no reason for introducing a floor to BPF's supported ratings and has maintained systemic support constant at one notch. Consequently, BPF's long-term debt and deposit ratings were downgraded to Ba1 from Baa3.

The outlook on BPF's ratings is stable, reflecting the stable outlook on PSA's ratings.

RATINGS RATIONALE FOR SUBORDINATED AND JUNIOR SUBORDINATED DEBT

The bank's subordinated and junior subordinated debt programme ratings are notched off the bank's BCA and are positioned one notch and two notches below the BCA, respectively. Therefore, today's downgrade of BPF's BCA by one notch prompted the downgrade of these ratings by the same magnitude.

WHAT COULD CHANGE THE RATING UP / DOWN

An upgrade or downgrade of PSA's long-term ratings would likely result in a similar rating action on BPF's standalone BFSR, which could in turn impact the bank's long-term ratings.

The long-term ratings of BPF could also be downgraded in the event of (1) a deterioration in the bank's financial results; and (2) a negative development in relation to the European Commission conditions attached to the definitive support plan for the bank. Any elements leading Moody's to change its assessment of systemic support available to BPF could also lead to an upgrade or a downgrade of the bank's long-term ratings, independently from its standalone BFSR.

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

LIST OF AFFECTED RATINGS

The following ratings of BPF and related entities were affected by today's rating actions:

- BPF's standalone BFSR was downgraded to D/ba2 from D+/ba1 and its outlook was revised to stable

- BPF's long-term debt and deposit ratings were downgraded to Ba1 from Baa3 and their outlook was revised to stable

- BPF's short-term debt and deposit ratings were downgraded to Not Prime from Prime-3

- BPF's subordinated / Tier III debt MTN programme rating was downgraded to (P)Ba3 from (P)Ba2 and its outlook was revised to stable

- BPF's junior subordinated MTN programme rating was downgraded to (P)B1 from (P)Ba3 and its outlook was revised to stable

- Peugeot Finance International N.V. (PFI)'s backed long-term senior unsecured rating was downgraded to Ba1 from Baa3 and its outlook was revised to stable

- SOFIRA SNC's backed commercial paper rating was downgraded to Not Prime from P-3.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

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.

Guillaume Lucien-Baugas
Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades Banque PSA Finance's ratings following the downgrade of its parent Peugeot S.A.
No Related Data.
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