News Column

Fitch Rates Synchrony Financial's Unsecured Notes 'BBB-'

August 12, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'BBB-' rating to Synchrony Financial's (Synchrony) inaugural issuance of $3.6 billion of senior unsecured debt.

KEY RATING DRIVERS

The senior unsecured debt rating is equalized with Synchrony's long-term Issuer Default Rating (IDR), which Fitch assigned on July 31, 2014. The equalization reflects increasing unsecured debt in Synchrony's funding profile and the availability of unencumbered assets, both of which enhance Synchrony's financial flexibility.

The proceeds of the debt issuance will be primarily used to repay existing debt. As such, Fitch does not believe the issuance will have a material impact on the company's leverage.

Fitch views the company's ability to successfully access the unsecured debt markets on reasonable terms favorably.

RATING SENSITIVITIES

The senior unsecured debt rating is primarily sensitive to changes in Synchrony's long-term IDR.

Fitch believes positive ratings momentum for Synchrony is limited in the near term. Longer term, however, positive ratings momentum could be driven by a reduced reliance on a limited number of retail partners, a material shift in the underlying risk profile of the portfolio toward higher credit quality borrowers, demonstrated access to the unsecured debt markets at a reasonable cost, and additional actions to further enhance funding and liquidity sources while maintaining strong capital levels at both the parent and operating company levels.

Furthermore, Fitch believes the durability of Synchrony Bank's Internet-based deposit platform in a rising rate environment will be a key determinant in evaluating the strength of the company's funding profile. Positive rating momentum could also develop from the company's ability to successfully execute on its strategy as a standalone company and prudently grow the business over time while balancing the expectations of shareholders.

For Synchrony, negative ratings momentum could develop from the loss or default of a key retail relationship, substantial credit quality deterioration, an increase in leverage, a reduction in liquidity, an inability to access the capital markets on reasonable terms for funding, significant shareholder distributions above expectations, and/or potential new and more onerous rules and regulations. The unsecured debt could also be notched below the IDR in the event of insufficient unencumbered assets relative to the amount of unsecured debt outstanding.

Fitch assigns the following rating:

Synchrony Financial:

--Senior Unsecured Debt rated 'BBB-'

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

Fitch Fundamentals Index (April 2014)

U.S. Bank HoldCos & OpCos: Evolving Risk Profiles (March 2014)

Global Financial Institutions Rating Criteria (January 2014)

FinCo Deposit Sensitivity to Rising Rates (January 2014)

Nonbank Financial Institution Interest Rate Sensitivity (January 2014)

2014 Outlook: U.S. Finance and Leasing Companies (November 2013)

Finance and Leasing Companies Criteria (December 2012)

Applicable Criteria and Related Research:

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696720

2014 Outlook: U.S. Finance and Leasing Companies (Strong Fundamentals, But Sector Headwinds Persist)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=722839

Nonbank Financial Institution Interest Rate Sensitivity

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723766

FinCo Deposit Sensitivity to Rising Rates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726196

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=849315

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings, Inc.

Primary Analyst

Brendan Sheehy, +1-212-908-9138

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Meghan Neenan, CFA, +1-212-908-9121

Director

or

Committee Chairperson

Nathan Flanders, +1-212-908-0827

Managing Director

or

Media Relations

Brian Bertsch, +1-212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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