|
Brutta faccenda... anche qui, o arrivano le giubbe blu con il cash, oppure la benzina é finita, secondo S&P, che abbatte il rating di 3 livelli e tiene CIT Group in creditwatch negative finché non sarà stata definita la vicenda dell'accesso al TLGP.
CIT Group Inc. Downgraded To 'BB-/B' From 'BBB-/A-3'; Placed On CreditWatch Negative
-- CIT's funding profile has not benefited from converting into a bank holding company (BHC) to the degree we had expected, which has caused further erosion in liquidity available to repay maturing obligations and meet lending commitments. Thus far, CIT has not been granted access to the FDIC's Temporary Liquidity Guarantee Program (TLGP).
-- We are lowering our rating on CIT to 'BB-/B' from 'BBB-/A-3' and placing it on CreditWatch Negative.
-- We believe that CIT's liquidity position prospectively will deteriorate to a level inconsistent with the rating if it is unable to benefit from the TLGP and additional transfers of assets to CIT Bank.
-- If CIT's liquidity position and funding costs benefit materially from current initiatives, we will remove the CreditWatch listing and affirm the ratings within 90 days.
NEW YORK (Standard & Poor's) June 12, 2009--Standard & Poor's Ratings Services said today that it lowered its ratings on CIT Group Inc., including its counterparty credit rating, to 'BB-/B' from 'BBB-/A-3'. We also lowered our ratings on CIT's hybrid capital instruments to 'CCC+' from 'B+'. At the same time, we placed our rating on CIT on CreditWatch with negative implications.
"The downgrade reflects our assessment that CIT's funding profile has not benefited from converting into a bank holding company (BHC) to the degree we had expected, which has caused further erosion in liquidity available to repay maturing obligations and meet lending commitments," said Standard & Poor's credit analyst Rian M. Pressman, CFA. In particular, although the FDIC is still considering its application, CIT has thus far not been granted access to TLGP funding.
Moreover, there has been relatively limited benefit from transfers of loans to CIT Bank. We believe this has reduced CIT's funding flexibility and forced it to increase its reliance on less-attractive funding sources, including secured borrowings and net portfolio run-off.
Even if CIT is ultimately accepted into the TLGP, the degree to which it might benefit is uncertain. Any issuance amount is at the FDIC's discretion and could be less than the $10 billion that the company would have been able to issue if it had been a BHC as of October 2008.
We also believe that the transfer of assets to CIT Bank has thus far yielded only limited benefits for the company's funding profile. To date, CIT has received permission (from the Federal Reserve via a waiver of 23A) to transfer only $5.7 billion in government-guaranteed student loans to CIT Bank. We are unclear as to how receptive regulators are to additional transfers and at what pace those transfers might occur.
The commercial banking strategy also depends on CIT Bank's ability to obtain additional brokered deposits and diversify into alternative deposit types, including retail. Although CIT Bank has had some success in raising brokered deposits, its deposit-raising potential is untested. (untested: un garbato eufemismo per dire che che i risparmiatori non hanno depositi in CIT bank, anche perché per attirare depositi ci vogliono gli sportelli).
We believe that deposits will have to be significantly higher than current levels ($3 billion at March 31, 2009) and more diversified in terms of product to materially benefit CIT's funding profile. We regard brokered deposits as a less-stable funding source than deposits obtained through a retail branch network, because they are more sensitive to pricing variations, and as a result tend to be less sticky.
CIT's diminished funding flexibility has forced it to rely increasingly on loan portfolio net runoff and secured borrowings. CIT's position as a prominent middle-market lender is likely to erode if it is unable to rely on
unsecured funding. Moreover, we expect CIT to continue to use its unencumbered assets to support additional secured financings if it is unable to access TLGP and move additional assets to CIT Bank.
Although not the primary driver, deteriorating asset quality and our expectation for continuing operating losses through the first half of 2010 contributed to this rating action.
Quarterly net losses, diminished financial flexibility, and the lack of a common equity dividend make a deferral more likely and justify the four-notch differential between the rating on CIT's hybrid capital instruments
(CCC+/Watch Neg/--) and the long-term counterparty credit rating. We also believe there is a heightened risk of conversion to common equity for CIT's outstanding preferred stock instruments, although management has given no indication that it is contemplating such a move.
The CreditWatch Negative listing reflects our belief that CIT's funding and liquidity position will deteriorate prospectively to a level inconsistent with the rating if it is unable to benefit from the TLGP and additional
transfers of assets to CIT Bank. Our review will ascertain the ultimate benefit CIT can derive from these initiatives.
In addition, we will review whether the current and prospective level of balance-sheet encumbrance reduces the security available to support unsecured bond holders, thus warranting a one-notch downgrade of CIT's unsecured debt relative to the long-term counterparty credit rating.
If CIT's liquidity position and funding costs benefit materially from these initiatives, we will remove the CreditWatch Negative listing and affirm the ratings within 90 days
|