New York, November 21, 2012 -- Moody's Investors Service affirmed the ratings of General Motors Financial Company, Inc. (GMF, corporate family rating and senior unsecured debt at Ba3) and changed the outlook to positive from stable. The rating action follows GMF's announcement that it plans to acquire the international auto finance operations of Ally Financial Inc. The purchase price is $4.2 billion, including a premium of approximately $550 million to the book value of the international operations. The acquisition is expected to close in mid- 2013, subject to regulatory approvals. GMF's ratings currently incorporate one notch of lift from ownership and support by parent General Motors Company (GM).
The change in outlook reflects the credit benefits of the acquisition, including stronger asset quality and increased ties to GM.
Following the acquisition GMF will have stronger asset quality and reduced volatility of assets and cash flows due to a much higher percentage of prime assets. Also, though GMF's leverage will rise, the financing structure of the acquisition - including a $2 billion equity contribution to GMF by GM - will be less aggressive than originally indicated (GM had noted in its 8-K filing of August 2012 that the acquisition, if consummated, could result in a more than doubling of GMF's leverage). These benefits mitigate the significant execution and integration-related challenges associated with the acquisition - Ally International is a large and geographically sprawling business with operations in Europe, Mexico, Latin America and China via a 40% joint venture. GM will likely allocate management resources to the integration project, further mitigating this risk. Another supportive factor is the fact that the international operations' leadership team will remain in place.
The positive outlook also reflects the increased level of integration of GMF with GM, and the increased strategic importance of GMF to GM, post-acquisition. Following the acquisition GMF will be able to support GM customers and dealers in markets comprising about 80 percent of GM's global sales; thus GMF will have evolved into largely a GM captive operation. Over time we will consider how the closer integration of GMF and GM could more tightly align the two credits.
GMF provides auto finance solutions through auto dealers across the United States and Canada. GMF has approximately 3,700 employees, 809,000 customers and $16.3 billion in aassets as of September 30, 2012. The company is headquartered in Fort Worth, Texas.
The principal methodologies used in this rating was Finance Company Global Rating Methodology published in March 2012 and The Rating Relationship Between Industrial Companies And Their Captive Finance Subsidiaries, published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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Mark L. Wasden VP - Senior Credit Officer Financial Institutions Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Robert Franklyn Young MD - Financial Institutions Financial Institutions Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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