S&P reviews Springleaf, OneMain

Standard & Poor's said it placed its B counterparty credit and senior unsecured debt ratings on Springleaf Holdings Inc. on CreditWatch with negative implications.

At the same time, the agency placed its B+ counterparty credit and senior unsecured debt ratings on OneMain Financial Holdings Inc. on CreditWatch with negative implications.

The CreditWatch placements follow the announcement that Springleaf will acquire OneMain for $4.25 billion in cash.

Pro forma for the merger, S&P expects Springleaf to have a stronger market position than currently, but also substantially higher leverage.

Depending on how the company finances the transaction, the agency will most likely lower its rating on Springleaf by one notch if it expects leverage exceeding 6.5 times and by two notches for leverage above 12 times.

Without additional equity financing, S&P believes leverage will easily exceed 12 times. However, it will also assess how significantly the merger may enhance Springleaf's franchise – which could lessen or mitigate any downgrade.

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