DBRS Rates Ally Financial Inc.’s $750 million Issuance of Subordinated Debt at BB, Trend Positive

DBRS, Inc. (DBRS) has today assigned a Subordinated Debt rating of BB to the $750 million 5.750% Subordinated Debt issuance due November 2025 (the Notes) of Ally Financial Inc. (Ally or the Company). The trend on the Notes is Positive.

The proceeds from the Notes will be primarily used for the redemption of the Company’s Fixed Rate Cumulative Perpetual Preferred Shares, Series G.

The Positive trend reflects DBRS’s expectations that Ally’s financial performance will continue to improve supported by sound U.S. auto sales volumes, continued rationalization of the cost base, and additional actions by the Company to address legacy high cost debt. DBRS also sees earnings benefiting from the Company’s continuing shift towards a more bank-centric model with increasing origination volumes financed by Ally Bank’s (the Bank) low-cost deposit base. The Positive trend also considers that Ally’s broad product offering, deep industry knowledge and dealer-focused business model will allow the Company to successfully execute on its strategy of growing non-GM/Chrysler origination volumes. Nevertheless, should the expansion into these growth channels and new products materially alter the risk profile of the balance sheet, positive ratings momentum could stall or potentially reverse. Moreover, the resiliency of the retail direct deposit base in a rising rate, or otherwise disrupted, environment will be a key consideration for the ratings over the near-to-medium-term.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Finance Companies (October 2015). Other applicable methodologies include the Global Methodology for Rating Banks and Banking Organisations (June 2015), DBRS Criteria – Support Assessments for Banks and Banking Organisations (March 2015) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred and Contingent Capital Securities (February 2015). These can be found at: http://www.dbrs.com/about/methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: David Laterza
Rating Committee Chair: William Schwartz
Initial Rating Date: 16 May 2001
Most Recent Rating Update: 18 May 2015

For additional information on this rating, please refer to the linking document under Related Research.