DBRS Rates GM Financial $2.5 bn Issuance of Senior Notes due on Various Maturity Dates at BBB, Pos

DBRS, Inc. (DBRS) assigned a rating of BBB to the $1.5 billion 5.10% Senior Notes due January 17, 2024, the $500 million 5.65% Senior Notes due January 17, 2029 and the $500 million 4.20% Senior Notes due November 6, 2021 (together the Notes) issued by General Motors Financial Company, Inc. (GMF or the Company). The 4.20% Senior Notes constitute a further issuance to the $1.0 billion aggregate principal amount 4.20% Senior Notes issued on November 6, 2018. The trend on the Notes is Positive.

KEY RATING CONSIDERATIONS
The ratings of GMF reflect its ownership and its critical importance to General Motors Company (GM or the Parent) as a provider of auto financing to consumers and dealers. The ratings also consider that the predominant share of GMF’s business consists of financing GM vehicles and supporting GM dealers. Furthermore, ratings also consider, GMF’s support agreement with GM that requires GM to make a capital contribution should the Company’s leverage ratio surpass certain established levels. As a result, DBRS has assigned an SA1 designation, which implies strong and predictable support from GM, if needed. Given GMF’s SA1 designation and its reliance on the success of its parent, the ratings are closely linked and will likely move in tandem. Finally, GMF has a solid and evolving franchise, a sound and improving risk profile, solid earnings generation, an improving funding profile and acceptable capital position.

RATING DRIVERS
Given the linkage between GMF and GM, an upgrade of the Parent’s rating would likely have positive implications for GMF. Additionally, if the Parent’s Positive trend is returned to Stable, a similar action would likely occur for GMF. Conversely, a negative rating action on GM would likely result in negative rating implications for the Company. Finally, any indication of a reduction of support from GM would likely affect DBRS’s Support Assessment and potentially have a negative impact on GMF’s ratings.

RATING RATIONALE
As one of the largest global auto finance companies, the Company maintains a solid and evolving franchise. Indeed, GMF’s strong and growing North America segment has benefited considerably from being GM’s captive finance company, where it is the exclusive provider of GM subvented leases and loans. Importantly, with its recent exit from the slower growth European markets, GMF is now able to focus its resources on the faster growth U.S. market.

GMF’s earnings power remains sound, despite headwinds, including higher interest rates. The Company continues to maintain solid credit fundamentals. GMF’s risk profile remains sound, and its loan portfolio continues to migrate towards prime customers, reflecting its full captive status and increasing penetration of GM related loans and leases. Meanwhile, although GMF remains reliant on wholesale funding sources, it has made substantial progress in reducing asset encumbrance by becoming less dependent on secured forms of funding, contributing to the improvement in GMF’s financial flexibility. Finally, DBRS views the Company’s capitalization as acceptable, especially given its sound credit profile.

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

The applicable methodologies are Global Methodology for Rating Non-Bank Financial Institutions (November 2018), and Rating Companies in the Automotive Manufacturing and Supplier Industries (October 2018), which can be found on our website under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrs.com.

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.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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