November 16, 2012 / 6:11 PM / 5 years ago

TEXT-S&P affirms LeasePlan 'BBB+/A-2' ratings

7 Min Read

Overview
     -- In our view, Dutch banks are exposed to the potential of a more 
protracted downturn in The Netherlands and wider eurozone.
     -- We are therefore revising our economic risk score for The Netherlands 
and our Banking Industry Country Risk Assessment to '3' from '2'.
     -- We consider that LeasePlan has only moderately exposure to The 
Netherlands. 
     -- We are therefore affirming the ratings on LeasePlan at 'BBB+/A-2'. 
     -- The stable outlook reflects our expectations that potential pressure 
on LeasePlan's stand-alone credit profile or weakening parental support may 
offset the benefits of an upgrade of its 50% owner, Volkswagen Bank.
    
Rating Action
On Nov. 16, 2012, Standard & Poor's Ratings Services affirmed its 'BBB+/A-2' 
long- and short-term counterparty credit ratings on Dutch Bank LeasePlan 
Corporation N.V (LeasePlan). The outlook is stable.

Rationale
We have reviewed the Banking Industry Country Risk Assessment (BICRA) on The 
Netherlands. Against the backdrop of a potentially more protracted downturn in 
The Netherlands and wider European Economic and Monetary Union (eurozone), we 
have lowered our economic risk and BICRA scores on The Netherlands to '3' from 
'2' (for more information, see "Various Rating Actions Taken On Dutch Banks 
Due To Increased Economic Risks," published Nov. 16, 2012 on RatingsDirect on 
the Global Credit Portal).

The affirmation reflects LeasePlan's 'bbb+' anchor--the starting point for our 
ratings--which remains unchanged, and the bank's limited exposure to The 
Netherlands, which only accounts for about 15% of its assets. 

We base our anchor for LeasePlan on a blended economic risk score of '3' and 
an industry risk score of '3' for banks operating in The Netherlands. The 
anchor reflects the bank's geographically diversified profile. The blended 
economic risk score is based on the geographic breakdown of LeasePlan's lease 
portfolio, and reflects our view of the weighted-average economic risk in the 
countries in which LeasePlan operates, such as The Netherlands, U.K., U.S., 
Germany, France, and Southern and Central Eastern Europe.  

We have maintained our assessment of LeasePlan's capital and earnings as 
"strong," as our criteria define the term, based on our opinion that 
LeasePlan's risk-adjusted capital (RAC) ratio, according to Standard & Poor's 
measures, will range between 10% and 10.5% by the end of 2013 (compared with 
our previous expectations of 10% and 11%) despite an increase in economic 
risks in The Netherlands. Our revised economic risk score for The Netherlands 
has led us to lower our pro forma RAC ratio for LeasePlan to 9.9%, from 10.1% 
at the end of 2011. 

Our belief that credit risk in The Netherlands has increased does not 
constrain our projections for LeasePlan's RAC ratio going forward because its 
exposures there are limited. We expect LeasePlan's retained earnings to remain 
adequate and sufficient to increase its capital base gradually, even if it 
resumes dividend payouts to shareholders in 2012. Nevertheless, we see some 
downside risk for these projections. In our opinion, a worsening of 
macroeconomic conditions in several European countries may adversely affect 
our projection for LeasePlan's RAC ratio. We also acknowledge that new 
business volumes could decline in 2012 and 2013 and residual value charges 
could increase if the macroeconomic environment in Europe deteriorates 
further. 

Our ratings on LeasePlan also reflect our assessment of the bank's "weak" 
business position, "adequate" risk position, "below average" funding, and 
"adequate" liquidity, as our criteria define these terms. It also reflects its 
strategic importance to its 50% owner, Volkswagen Bank GmbH (VW Bank; 
A-/Positive/A-2). 

Outlook
The stable outlook reflects our expectations that potential pressure on 
LeasePlan's stand-alone credit profile or weakening parental support may 
offset the benefits of an upgrade of VW Bank and Volkswagen AG 
(A-/Positive/A-2).

Under our base-case scenario, an upgrade of VW Bank and Volkswagen AG wouldn't 
automatically result in an upgrade of the ratings on LeasePlan because:
     -- LeasePlan's RAC ratio may not remain above 10% owing to a 
deterioration in the economic environment of some European countries, 
including in Southern Europe and The Netherlands; or
     -- We may consider reducing the uplift for parental support in the medium 
term due to LeasePlan's limited integration and potential lack of direct 
alignment with VW group's long-term strategic priorities, and if we perceived 
that VW Bank and the larger Volkswagen group were starting to question the 
long-term presence of LeasePlan within the group. 

We may lower the ratings on LeasePlan if, everything else being equal, we 
consider its importance to the VW group to be falling, leading us to consider 
its strategic importance to be only "moderate", as our criteria defines these 
terms. 

A positive rating action could only be possible if we perceived a material 
improvement in LeasePlan's capital and funding profile, which we currently see 
as unlikely. 
Ratings Score Snapshot
Issuer Credit Rating        BBB+/Stable/A-2

SACP                        bbb-
 Anchor                     bbb+
 Business Position          Weak (-2)
 Capital and Earnings       Strong (+1)
 Risk Position              Adequate (0)
 Funding and Liquidity      Below average and Adequate (-1)

Support                     +2
 GRE Support                0
 Group Support              +2
 Sovereign Support          0

Additional Factors          0

Related Criteria And Research
     -- Various Rating Actions Taken On Dutch Banks Due To Increased Economic 
Risks, Nov. 16, 2012
     -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
     -- Group Rating Methodology And Assumptions, Nov. 9, 2011
     -- Banking Industry Country Risk Assessment Methodology And Assumptions, 
Nov. 9, 2011
     -- Bank Capital Methodology And Assumptions, Dec. 6, 2010


Ratings List
Ratings Affirmed

LeasePlan Corporation N.V.
 Counterparty Credit Rating             BBB+/Stable/A-2    

LeasePlan Corporation N.V.
 Senior Unsecured                       BBB+               
 Commercial Paper                       A-2                

LeasePlan Australia Ltd.
 Senior Unsecured                       BBB+               
 Commercial Paper                       A-2                

LeasePlan Finance N.V. (Dublin Branch)
 Senior Unsecured                       BBB+               
 Commercial Paper                       A-2                

LeasePlan New Zealand Ltd.
 Commercial Paper                       A-2                


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

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