(The following statement was released by the rating agency) Overview
-- On July 25, 2012, Standard & Poor's lowered by one notch its long-term rating on European auto manufacturer Peugeot S.A. (PSA, BB/Negative/B).
-- We are lowering the long- and short-term ratings on PSA's captive finance arm, Banque PSA Finance (BPF) to 'BBB-/A-3' from 'BBB/A-2', as we cap the rating on BPF two notches above that on its parent.
-- The negative outlook reflects that on PSA. Rating Action On July 25, 2012, Standard & Poor's Ratings Services lowered to 'BBB-/A-3' from 'BBB/A-2' its long- and short-term counterparty credit ratings on Peugeot's captive finance arm, Banque PSA Finance (BPF) and its subsidiary Credipar. The outlook is negative. At the same time we lowered to 'A-3' from 'A-2' the short-term counterparty credit rating on Sofira, also a subsidiary of BPF. Rationale The downgrade follows a similar action on BPF's parent, French carmaker Peugeot S.A. (PSA, BB/Negative/B) (see "French Carmaker Peugeot Downgraded To 'BB' On Rapid Cash Burn And Mounting Operational Challenges; Outlook Negative," published July 25, 2012, on RatingsDirect on the Global Credit Portal). Our rating on BPF is constrained by the rating on PSA, reflecting the position of the bank as a captive finance subsidiary of the group. BPF's long-term rating stands two notches above that on PSA, taking into account BPF's stand-alone credit profile (SACP) of 'bbb', its regulated status as a bank, and our view of its "moderate" systemic importance in France. BPF is wholesale funded, which we view as a weakness, but this is mitigated by its conservative liquidity management. The bank's funding mainly depends on capital market instruments and to some extent on bank facilities and securitization. In terms of financial autonomy, the bank's policy is to cover all refinancing needs for at least six months, assuming no rollover of outstanding debt, while continuing to provide loans. BPF has consistently been above this limit, in our estimates. As of end-June 2012, the bank had financial autonomy of six months; a securitization of French commercial debt should bring this to seven months by end-July. The bulk of its refinancing resources have original maturities greater than one year, and its short-term outstanding debt is covered nearly two times by a liquidity buffer composed almost entirely of undrawn committed bank credit lines. We believe BPF continues to have good market access, as its diversified set of investors illustrates, and based on its successful issuance of three senior unsecured bonds in the first semester of 2012 that allowed the bank to nearly complete its 2012 bond financing program. As a regulated bank, BPF retains access to European Central Bank funding. We consider BPF to be a core subsidiary of its lower-rated parent PSA. Although we generally don't rate core subsidiaries higher than their parents, we believe BPF is to some extent insulated from PSA because of its regulatory and legal status as a bank, higher SACP, and fully independent refinancing strategy. For regulated subsidiaries, and under our captive finance operations criteria, we generally cap the long-term rating on captive finance subsidiaries one notch above the long-term rating on the parent. However, we cap the rating on BPF two notches above that on its parent given our view of BPF being also of "moderate" systemic importance in France and our assessment of the French government (Republic of France; unsolicited AA+/Negative/A-1+) as "supportive" to its banking system. We believe that possible extraordinary government support to BPF in the case of stress further insulates it from potential distress at its parent company. Outlook The outlook is negative and mirrors that on PSA. We anticipate that we would likely downgrade BPF if we downgraded PSA. We expect BPF to remain of "moderate" systemic importance in France. Given past experience, notably at the height of the financial crisis, we believe additional financial or funding support would be forthcoming in case of need and we would assess its rating implications in due course. We also expect BPF to maintain its intrinsic characteristics of a captive finance company with resilient revenues and earnings, strong capitalization, an adequate risk profile, and conservative liquidity management. We would most likely consider revising the outlook on BPF to stable if we revised the outlook on PSA to stable. Ratings Score Snapshot Issuer Credit Rating BBB-/Negative/A-3 SACP bbb Anchor a- Business Position Weak (-2) Capital and Earnings Strong (+1) Risk Position Adequate (0) Funding and Liquidity Below Average and Adequate (-1) Support 0 GRE Support 0 Group Support 0 Sovereign Support +1 Additional Factors -2 * *Issuer credit rating capped two notches above the parent's long-term rating. Related Criteria And Research
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
-- Group Rating Methodology And Assumptions, Nov. 9, 2011
-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
-- Captive Finance Operations, April 17, 2007
-- Bank Capital Methodology And Assumptions, Dec. 6, 2010
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Regulation Benefits Ratings On European Automakers' Captive Finance Subsidiaries, May 18, 2006 Ratings List Downgraded
To From Banque PSA Finance Credipar Counterparty Credit Rating BBB-/Negative/A-3 BBB/Negative/A-2 SOFIRA Counterparty Credit Rating --/--/A-3 --/--/A-2 Commercial Paper A-3 A-2 Banque PSA Finance Senior Unsecured BBB- BBB Certificate Of Deposit Foreign Currency BBB-/A-3 BBB/A-2 Local Currency BBB-/A-3 BBB/A-2 Certificate Of Deposit A-3 A-2 Credipar Certificate Of Deposit Foreign Currency BBB-/A-3 BBB/A-2 Local Currency BBB-/A-3 BBB/A-2 Peugeot Finance International N.V. Senior Unsecured* BBB- BBB Commercial Paper* A-3 A-2 *Guaranteed by Banque PSA Finance. (Caryn Trokie, New York Ratings Unit)