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Rating Action:

Moody's places General Motors Financial Company's ratings on review for downgrade, following similar action on the ratings for its parent

25 Mar 2020

New York, March 25, 2020 -- Moody's Investors Service, ("Moody's") placed the ratings for General Motors Financial Company, Inc. (GMF) and its subsidiaries, including the Baa3 long-term senior unsecured and the Prime-3 short-term ratings, on review for downgrade.

The rating action follows a similar action on the ratings for GMF's ultimate parent company General Motors Company (GM, Baa3 senior unsecured, review for downgrade). Please see separate press release dated 25 March 2020.

The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook and falling oil prices are creating a severe and extensive credit shock across many sectors, regions and markets. The current situation as well as the significant rise in used car prices over the last decade place pressure on the credit strengths of the auto captive sector, on which we maintain a negative outlook. Moody's believes that delinquency rates, loan defaults and lease residual realization trends will worsen in the next 12 months. We note, however, that US auto captive finance companies are moderately well positioned to weather a level of shock in the system absent meaningful declines in used car prices and a rapid and unexpected deterioration of liquidity at the parent level.

In its analysis Moody's incorporates the strategic importance of captives to their auto affiliates due to their ability to stimulate auto sales. Auto finance captives are expected to provide a consistent source of purchase financing to dealers and consumers, thereby aiding the auto manufacturers in meeting their sales objectives. The reliance of the auto finance captives on their automotive parents for liquidity remains high, although an important feature of the auto finance companies is their ultimate reliance on consumers and dealers to regularly make monthly payments on their loans or leases thereby partially reducing debt outstanding on the asset-backed securitization pools used by the auto captives for a portion of the loans and leases.

To the extent that capital markets with respect to the unsecured and secured funding contract, captives will have to reduce the new origination volumes although it will be to the disadvantage of the parent as the parent aims to originate new sales once the environment stabilizes.

On Review for Downgrade:

..Issuer: General Motors Financial Company, Inc.

....Commercial Paper, Placed on Review for Downgrade, currently P-3

.... Issuer Rating, Placed on Review for Downgrade, currently Baa3

....Senior Unsecured Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Baa3

....Pref. Stock, Placed on Review for Downgrade, currently Ba2

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

....Backed Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

....Backed Pref. Shelf, Placed on Review for Downgrade, currently (P)Ba2

....Pref. Shelf, Placed on Review for Downgrade, currently (P)Ba2

....Subordinate Shelf, Placed on Review for Downgrade, currently (P)Ba1

....Backed Subordinate Shelf, Placed on Review for Downgrade, currently (P)Ba1

....Senior Unsecured Shelf, Placed on Review for Downgrade, currently (P)Baa3

....Backed Senior Unsecured Shelf, Placed on Review for Downgrade, currently (P)Baa3

..Issuer: General Motors Financial International BV

....Backed Senior Unsecured Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Baa3

....Backed Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

..Issuer: General Motors Financial of Canada, Ltd.

....Backed Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

..Issuer: GMF Australia Pty Ltd

....Backed Senior Unsecured Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Baa3

Outlook Actions:

..Issuer: General Motors Financial Company, Inc.

....Outlook, Changed To Rating Under Review From Stable

..Issuer: General Motors Financial International BV

....Outlook, Changed To Rating Under Review From Stable

..Issuer: General Motors Financial of Canada, Ltd.

....Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

The review for downgrade of GMF's ratings was prompted by the announcement of the review for downgrade of GM's ratings. GM's weaker credit profile will have negative implications for GMF's access to funding and its financing volumes. GM's support to GMF is evidenced by a support agreement under which GMF can require GM to inject capital to restore leverage below an 11.5x net earning asset to tangible net worth threshold, should GMF exceed the threshold. The support agreement includes an unsecured $1 billion junior subordinated credit facility, provided by GM. It also affirms GMF's access to $14.5 billion of GM's unsecured corporate revolving credit facility subject to available capacity and exclusive access to $2.0 billion of a 364-day credit facility.

GMF's ba3 stand-alone profile is supported by the company's well managed portfolio credit quality as well as adequate capital cushion that protects creditors against unexpected losses. GMF's tangible equity to tangible assets capital cushion (10% as of FY ended 31 December, 2019) will remain close to 9.5% under current Moody's assumptions. Moody's expects future distributions to its parent will be carefully considered given the uncertainty in the environment, as well as its current and expected leverage and liquidity positions. Moody's will continue to assess the extent to which managed receivables ($96 million as of 31 December 2019) may decline, impacting on the company's profitability. Moody's also anticipates that the company's cost of debt funding will increase, resulting in narrower finance margins. Additional credit challenges for GMF its exposure to the performance trends of its parent and the company's significant use of securitization, which Moody's believes will continue to increase in the current environment, further constraining its financial flexibility.

Environmental, social and governance (ESG) factors play an important role in Moody's assessment of GMF's credit quality. As its relationship with GM is key to its business, the environmental considerations are closely aligned to those of GM. While the environmental challenges related to tightening emissions regulations in key global markets may not affect GM's near-term profitability, they could weigh on credit quality of automakers and their captives globally in the longer term. Moody's does not have any particular concerns regarding GMF's governance.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Ratings upgrades are unlikely over the next 12-18 months, given that GMF's ratings are on review for downgrade.

GMF's ratings could be confirmed upon completion of the review, if the ratings for its parent GM are confirmed.

An unexpected and material decline in asset quality and profitability, diminished liquidity, or leverage (TCE/TMA) that declines to less than 7% could lead to a lower stand-alone credit profile for GMF.

GMF's ratings could be downgraded upon completion of the review, following a downgrade of the ratings for its parent GM.

The methodologies used in these ratings were Finance Companies Methodology published in November 2019, and Captive Finance Subsidiaries of Nonfinancial Corporations published in August 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Inna Bodeck
VP - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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