Actions follow downgrade of parent's ratings
New York, June 22, 2012 -- Moody's Investors Service has today downgraded the supported debt
ratings of HSBC Holdings plc's (HSBC) US subsidiaries, including
HSBC USA Inc., HSBC Bank USA, N.A. and
HSBC Finance Corporation. Today's rating actions conclude
the reviews for downgrade initiated on 22 February 2012, and follow
the downgrade of HSBC's senior debt rating to Aa3 from Aa2 (see
"Moody's downgrades firms with global capital markets operations,"
dated 21 June 2012 and available on moodys.com).
LIST OF AFFECTED RATINGS
The affected subsidiaries are as follows:
- HSBC USA Inc.: senior unsecured debt rating downgraded
to A2 from A1; subordinate debt rating downgraded to A3 from A2;
non-cumulative preferred stock rating downgraded to Baa2 (hyb)
from Baa1 (hyb); Prime-1 commercial paper rating confirmed
- HSBC Bank USA, N.A.: long-term
bank deposit and senior unsecured debt ratings downgraded to A1 from Aa3;
subordinate debt rating downgraded to A2 from A1; Prime-1
short-term bank deposit rating affirmed; C/a3 standalone bank
financial strength rating (BFSR)/baseline credit assessment (BCA) affirmed
- HSBC USA Capital Trust I: preferred stock downgraded to
Baa1 (hyb) from A3 (hyb)
- HSBC USA Capital Trust III: preferred stock downgraded
to Baa1 (hyb) from A3 (hyb)
- Republic New York Corporation: subordinate debt rating
downgraded to A3 from A2; preferred stock downgraded to Baa1 (hyb)
from A3 (hyb)
- HSBC Finance Corporation: long-term issuer rating
downgraded to Baa1 from A3; senior unsecured debt rating downgraded
to Baa1 from A3; subordinate debt rating downgraded to Baa2 from
Baa1; non-cumulative preferred stock rating downgraded to
Baa3 (hyb) from Baa2 (hyb); commercial paper and short-term
issuer ratings downgraded to Prime-2 from Prime-1
- HFC Bank plc: senior unsecured debt rating downgraded to
Baa1 from A3
- Beneficial Company LLC: long-term issuer rating
downgraded to Baa1 from A3; senior unsecured debt rating downgraded
to (P)Baa1 from (P)A3
- HSBC Finance Capital Trust IX: cumulative preferred stock
rating downgraded to Baa2 (hyb) from Baa1 (hyb)
For a complete list of affected ratings, please refer to the individual
issuer pages on www.moodys.com. For additional information
on bank ratings, refer to the webpage containing Moody's related
announcements: http://www.moodys.com/bankratings2012.
Following the rating actions, the outlooks on the subsidiaries'
supported ratings are stable. Moody's added that the outlook
on HSBC Bank USA's standalone BFSR/BCA remains negative.
RATINGS RATIONALE
Today's actions reflect the potential adverse effects of HSBC's
lower capacity to support its US subsidiaries, reflected by the
downgrade of the HSBC group's intrinsic financial strength to a1
from aa3. The downgrade balances Moody's views of the risks
HSBC faces even as a moderate player in the capital markets (including
the challenge of monitoring the risks of a global capital markets platform)
with the strengths of the group, including its strong geographic
diversification and historically low earnings volatility. Overall,
these factors mean Moody's still views HSBC as one of the strongest
banking groups globally. Nevertheless, Moody's incorporates
its view of the weaker credit profile of the HSBC group into its analysis
of the group's capacity to support its subsidiaries in the US,
resulting in today's rating actions. However, the actions
do not reflect a change in Moody's expectation of the willingness
or likelihood that HSBC would provide support to these subsidiaries,
if needed.
RATIONALE FOR OUTLOOKS
Following today's actions, the outlooks on the supported ratings
of the US subsidiaries are stable, consistent with the stable outlook
on the group's intrinsic financial strength. The outlook
on HSBC Bank USA's standalone BFSR/BCA is negative due to the execution
risk inherent in the bank's ongoing strategic shift to businesses
and activities that are more closely aligned with the group's commercial
strategy.
RATING METHODOLOGIES
The principal methodologies used in rating HSBC USA Inc.,
HSBC Bank USA, N.A., HSBC USA Capital Trust
I, HSBC USA Capital Trust III, and Republic New York Corporation
were Bank Financial Strength Ratings: Global Methodology published
in February 2007, Incorporation of Joint-Default Analysis
into Moody's Bank Ratings: Global Methodology published in March
2012. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
The principal methodology used in rating HSBC Finance Corporation,
HFC Bank plc, Beneficial Company LLC, and HSBC Finance Capital
Trust IX was Finance Company Global Rating Methodology published in March
2012. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU is endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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
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Joseph?B?Pucella
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Financial Institutions Group
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Robert?Franklyn?Young
MD - Financial Institutions
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Moody's downgrades the supported debt ratings of HSBC's US subsidiaries
