July 01, 2009
Standard & Poor’s Downgrades AmeriCredit’s Ratings
NEW YORK — Standard & Poor's Ratings Services said that it lowered two
credit ratings for AmeriCredit Corp., saying the auto finance company faces
further deterioration in its loan portfolio.
S&P
reduced AmeriCredit’s long-term counterparty credit rating to 'B' from 'B+' and
its senior unsecured debt rating to 'B-' from 'B'. The ratings were removed from
CreditWatch Negative, where they were placed Oct. 29, 2008. However, the
outlook is negative.
"The downgrade reflects our
expectation that AmeriCredit's asset quality will continue to deteriorate,
particularly given that consumer credit losses generally correlate to
unemployment, which we expect to exceed 10 percent in the
U.S.
by
mid-2010," said S&P’s credit analyst Rian M. Pressman.
Credit losses are expected to worsen
by depressed recovery rates on repossessed vehicles, S&P said.
Despite AmeriCredit’s troubles it
has tightened credit standards, leading to better relative performance for
post-March 2008 originations, which comprise approximately one-quarter of its
total receivables portfolio.
The auto finance company has also
successfully extended its master warehouse credit facility and executed
securitization transactions through Deutsche Bank and other market
participants. AmeriCredit is currently marketing a TALF-eligible senior-subordinated
securitization. This would be an important first step in regaining access to
the public asset-backed securities (ABS) markets, S&P said.
The ratings
firm said the negative outlook on AmeriCredit reflects the
recessionary economic environment, asset quality, liquidity,
and profitability could continue to weaken to a level inconsistent with the
current rating. It also reflects AmeriCredit's dependence on securitization
transactions for long-term funding given the continued fragility of the ABS
markets.
The stabilization of AmeriCredit's
long-term funding profile (either through its demonstrated ability to access
the public ABS markets consistently or secure other long-term funding
arrangements) may result in a more favorable outlook, provided asset quality,
profitability, and capital remain acceptable for its rating level. S&P said
it may lower the rating if AmeriCredit cannot stabilize its long-term funding
profile, or if asset quality, liquidity, and profitability deteriorate
appreciably beyond its current expectations.