Fitch Removes AmeriCredit Corp from Rating Watch, Outlook Negative
Fitch has affirmed the 'BB' ratings of AmeriCredit Corp. and removed them from Rating Watch Negative. Approximately $950 million of debt is affected by this action. The rating outlook is negative.
CHICAGO -- Fitch has affirmed the 'BB' ratings of AmeriCredit Corp. and removed them from Rating Watch Negative. Approximately $950 million of debt is affected by this action. The rating outlook is negative.
AmeriCredit Corp. was issued the 'BB' ratings in the Long-term Issuer Default Rating and Senior debt 'BB'. The rating affirmation reflects ACF's solid position in the auto finance market, portfolio diversification across the credit spectrum, experienced management team, consistent servicing and collections capabilities over economic cycles, and adequate capitalization for the rating level.
The removal of the company's ratings from Rating Watch Negative, where they were placed on Jan. 23, 2008, reflects the closing of a one-year, $2 billion forward purchase agreement with Deutsche Bank AG. Under this agreement the bank will purchase 'AAA'-rated asset-backed securities in registered public offerings on the AmeriCredit Automobile Receivables Trust platform, and the recent completion of a $750 million issuance of 'AAA'-rated AMCAR notes without the need for Deutsche participation.
Fitch believes the Deutsche agreement provides needed liquidity, certainty of execution, confidence in the company's collateral, and an opportunity to upsize future ABS transaction size.
The rating outlook reflects the negative impact rising unemployment and declining collateral values will have on portfolio credit quality, the uncertain capital markets environment's impact on funding costs, and the expectation that ACF's liquidity will decline with the potential expiration of a approximately $1.6 billion in warehouse capacity in calendar 2008. Still, Fitch is comfortable with the company's continuing liquidity profile, given significant reduction in calendar 2008 origination targets and the expectation that management will maintain unrestricted cash balances in a range of $300 million to $400 million.
Negative rating action could result from deterioration in credit quality combined with significant declines in profitability, other than temporary reductions in cash balances beyond management targets, reduced borrowing capacity on the master warehouse facility as a result of covenant violations, an inability to access the ABS markets beyond the expiration of the Deutsche commitment, and/or weakening capitalization. Conversely, stabilization of portfolio credit metrics, a reduction in funding costs resulting from more certain access to the capital markets, an improvement in funding flexibility, and/or an increase in available liquidity could provide positive rating momentum.
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