Moody’s cuts LeasePlan, rates Lincoln notes B1

Moody's Investors Service said it assigned a long-term debt rating of B1 to the €1.55 billion senior secured notes to be issued by Lincoln Finance Ltd. in connection with its acquisition of LeasePlan Corp. NV.

The outlook is stable.

Concurrently, the agency downgraded LeasePlan’s and its supported entities' long-term senior unsecured debt and deposit ratings to Baa1 from A3. The outlooks on these ratings are stable.

Moody's also downgraded LeasePlan's baseline credit assessment to baa3 from baa2. The short-term senior unsecured debt and deposit ratings were affirmed at Prime-2.

In addition, the agency downgraded LeasePlan's long-term and short-term counterparty risk assessments to A3(cr)/Prime-2(cr) from A2(cr)/Prime-1(cr).

These actions conclude the review for downgrade initiated on LeasePlan's ratings on July 28, 2015, following the bank's July 23 announcement of a change of ownership. On Feb. 1, LeasePlan announced that the European Central Bank (ECB) approved the transaction under which its 100% shareholder Global Mobility Holding BV (GMH; unrated) sold its shares to a consortium of investors. GMH is a joint venture between Volkswagen AG (VW; A3 negative) and Fleet Investment BV (unrated).

The new Lincoln debt will be used to finance part the 100% acquisition of LeasePlan's shares, the remainder being financed through equity.

Moody’s said the B1 rating on the notes is a function of: (a) The baa3 BCA of LeasePlan, which is Lincoln's principal investment; (b) the deeply subordinated position of the instrument and high expected loss-given-failure; and (c) the fact that LeasePlan is a regulated bank and may at times be constrained in its ability to pay dividends, a credit negative for Lincoln's creditors, which will be reliant on such dividend payments for the servicing of their debt.

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