Rating action follows announcement of leveraged buyout
Paris, July 28, 2015 -- Moody's Investors Service has today placed on review for downgrade
LeasePlan Corporation N.V.'s (LeasePlan) A3 long-term
senior unsecured debt and deposit ratings and its baa2 baseline credit
assessment (BCA). This rating action follows LeasePlan's
announcement on 23 July of a proposed takeover by a consortium of investors.
The bank's short-term senior unsecured debt and deposit ratings
were affirmed at Prime-2. Concurrently, Moody's
placed LeasePlan's long-term and short-term Counterparty
Risk Assessments of A2(cr)/Prime-1(cr) on review for downgrade.
RATINGS RATIONALE
On 23 July, LeasePlan announced that its current 100% shareholder
Global Mobility Holding B.V. (GMH; unrated) had reached
an agreement to sell its shares to a consortium of long-term investors.
GMH is a joint venture between Volkswagen Aktiengesellschaft (VW;
A2 stable) and Fleet Investment BV (unrated). The consortium of
buyers is composed of pension funds, sovereign wealth funds and
private equity funds. The closing of the transaction is expected
by the end of 2015 and is subject to obtaining regulatory approvals,
including from the European Central Bank in consultation with the Dutch
National Bank (DNB).
Moody's review for downgrade reflects the leveraged nature of the
proposed acquisition, which suggests a more aggressive financial
policy given the need to service the EUR1.55 billion cash-pay
acquisition debt and optimise the return on invested equity. Moody's
believes that earnings retention and capital accretion may be relatively
limited going forward, as the new owners will have little incentive
to leave significant buffers above the minimum regulatory capital ratios,
hence reducing financial flexibility in case of unexpected shocks.
In addition, although the acquirers anticipate the continued strategic
and operating independence of Leaseplan, the new owners' debt
burden may in time lead to changes in the company's direction and
risk profile.
Nonetheless, LeasePlan's credit profile should continue to
benefit from its status as a regulated credit institution. LeasePlan
is subject to a minimum Common Equity Tier 1 ratio and has to meet certain
liquidity requirements. This supervision could mitigate the risk
of an overly aggressive financial policy and creates a relatively strong
"ring-fence" for LeasePlan's credit profile.
Moody's review will focus on the impact of the transaction on LeasePlan's
creditworthiness, in particular its financial policy, including
future dividend pay-outs, and its strategic direction,
set against the protection afforded by the bank's regulated status.
The review will likely be concluded towards the anticipated closing of
the transaction (by the end of 2015), after all regulatory approvals
have been obtained.
WHAT COULD CHANGE THE RATING UP/DOWN
LeasePlan's BCA and long-term ratings may be downgraded if
Moody's believes that the acquirers are likely to implement a materially
more aggressive financial policy at the bank, thus diluting some
of the bank's current strengths. The ratings could be confirmed
at their current levels if Moody's believes that the weaknesses
caused by the transaction are broadly mitigated by regulatory safeguards.
LIST OF AFFECTED RATINGS, BASELINE CREDIT ASSESSMENTS AND COUNTERPARTY
RISK ASSESSMENTS
The following ratings, Baseline Credit Assessments (BCAs) and Counterparty
Risk Assessments have been placed on review for downgrade:
- LeasePlan Corporation N.V.'s BCA and adjusted
BCA of baa2
- LeasePlan Corporation N.V.'s long-term
debt and deposit ratings of A3
- LeasePlan Corporation N.V.'s long-term
and short-term counterparty risk assessments of A2(cr)/Prime-1(cr)
- LeasePlan Australia Limited's backed senior unsecured rating
of A3
- LeasePlan Finance N.V. (Dublin Branch)'s backed
senior unsecured rating of A3
- LeasePlan Finance N.V. (Dublin Branch)'s long-term
and short-term counterparty risk assessments of A2(cr)/Prime-1(cr)
The following ratings have been affirmed:
- LeasePlan Corporation N.V.'s short-term
debt and deposit ratings of Prime-2
- LeasePlan Australia Limited's backed short-term debt rating
of Prime-2
- LeasePlan Finance N.V. (Dublin Branch)'s backed
short-term debt rating of Prime-2
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
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.
The following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating as indicated:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person(s) that paid
Moody's to determine this credit rating.
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.
Guillaume Lucien-Baugas
Vice President - Senior Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Nicholas Hill
Managing Director
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 places LeasePlan Corporation's long-term ratings on review for downgrade
