U.S. markets closed
  • S&P 500

    3,811.15
    -18.19 (-0.48%)
     
  • Dow 30

    30,932.37
    -469.64 (-1.50%)
     
  • Nasdaq

    13,192.35
    +72.92 (+0.56%)
     
  • Russell 2000

    2,201.05
    +0.88 (+0.04%)
     
  • Crude Oil

    61.66
    -1.87 (-2.94%)
     
  • Gold

    1,733.00
    -42.40 (-2.39%)
     
  • Silver

    26.70
    -0.98 (-3.56%)
     
  • EUR/USD

    1.2088
    -0.0099 (-0.81%)
     
  • 10-Yr Bond

    1.4600
    -0.0580 (-3.82%)
     
  • GBP/USD

    1.3922
    -0.0091 (-0.65%)
     
  • USD/JPY

    106.5500
    +0.3200 (+0.30%)
     
  • BTC-USD

    44,825.67
    -2,759.40 (-5.80%)
     
  • CMC Crypto 200

    912.88
    -20.25 (-2.17%)
     
  • FTSE 100

    6,483.43
    -168.53 (-2.53%)
     
  • Nikkei 225

    28,966.01
    -1,202.26 (-3.99%)
     

Fiat Chrysler Finance Europe SA -- Moody's assigns a Baa3 issuer rating to FCA (Stellantis), outlook stable

  • Oops!
    Something went wrong.
    Please try again later.
·18 min read
  • Oops!
    Something went wrong.
    Please try again later.

Rating Action: Moody's assigns a Baa3 issuer rating to FCA (Stellantis), outlook stable

Global Credit Research - 11 Jan 2021

Frankfurt am Main, January 11, 2021 -- Moody's Investors Service ("Moody's") has today assigned a Baa3 issuer rating to Fiat Chrysler Automobiles N.V. (FCA), which will be renamed to Stellantis N.V. (Stellantis). Concurrently, Moody's has upgraded the senior unsecured ratings of FCA and its subsidiary Fiat Chrysler Finance Europe SA to Baa3 from Ba2. Moody's has also upgraded the short-term ratings of FCA and Fiat Chrysler Finance Europe SA to (P)P-3 from (P)NP. The outlook on both entities changed to stable from developing.

Moody's has also changed the outlook on the ratings of Peugeot S.A. (PSA) and its subsidiaries to stable from negative. Concurrently, Moody's has affirmed all ratings of PSA and its subsidiaries, including the issuer rating and backed senior unsecured ratings of PSA, where Stellantis will become the obligor, and of GIE PSA Tresorerie at Baa3. Following the merger to form Stellantis, Moody's will withdraw Peugeot S.A. (PSA)'s issuer rating and MTN program rating.

A full list of rating actions is shown at the end of this press release.

"The assigned Baa3 issuer rating on FCA reflects the expected closing of the merger between FCA and PSA to create Stellantis, a larger and more diversified entity with significant synergy potential.", said Matthias Heck, a Moody's Vice President -- Senior Credit Officer and Lead Analyst for FCA, PSA and Stellantis. "In our scenario of gradually recovering global light vehicle sales, Stellantis should be able to swiftly improve margins and de-lever to levels, required for the Baa3, while maintaining strong liquidity and being able to spend sizeable investments into carbon transition and autonomous driving technologies.", added Mr. Heck.

RATINGS RATIONALE

On January 04, 2021, the shareholders of FCA and PSA approved the merger of both entities to create Stellantis. Following the shareholder approvals and receipt of final regulatory approvals, the merger is expected to be completed on January 16, 2021. Upon completion, PSA will be merged into FCA, and FCA will be renamed Stellantis.

The assignment of the Baa3 issuer rating to FCA reflects the expected closing of the merger to create Stellantis. Stellantis combines FCA and PSA, which will rank among the largest global automotive manufacturers by volume and have larger scale, product, brand and regional diversification, as well as technology competence, than the previous separate entities. It also reflects the high synergy potential resulting from the merger, which is expected to support gradual margin improvements.

The senior unsecured ratings of FCA, where Stellantis will become the obligor, and of Fiat Chrysler Finance Europe S.A., are upgraded to Baa3, in line with the issuer rating. After the merger, these bonds will be structurally subordinated relatively to sizeable financial obligations at the operating companies and the senior unsecured notes originally issued by PSA, which continue to benefit from a guarantee of GIE PSA Tresorerie. With regards to the PSA bonds, these guarantees were implemented for historical reasons and Moody's considers these notes as legacy debt, which will disappear over time or upon maturity of the notes at the latest.

The other short term rating of FCA and the backed short-term rating of Fiat Chrysler Finance Europe S.A are upgraded to (P)P-3, from (P)NP. This aligns the short-term ratings with the Baa3 issuer rating and reflects the strong liquidity of Stellantis.

The stable outlook on all ratings reflects the expectation that the combined entity will achieve operating profit margins (Moody's adjusted EBITA) well within the range of 4% - 6% in 2021 already, and improve towards the high end of this range in 2022. It also reflects the expectation that debt/EBITDA (Moody's adjusted) will decline into the range of 2.0x -- 3.0x in 2021 and improve further within this range in 2022.

The Baa3 issuer rating is supported by (1) the company's strong and further improved credit metrics following the merger between FCA and PSA; (2) the group's scale, ranking among the world's largest automotive manufacturers; (3) its degree of geographic diversity, including a large and balanced exposure to its two main markets of North America and Europe; (4) expected margin improvements due to the realization of sizeable merger synergies and a track record of price and cost discipline; (5) the group's strong liquidity profile.

The Baa3 issuer rating is constrained by (1) the highly competitive nature of the automotive industry, especially in Europe, which weighs on growth and pricing activity; (2) the group's high reliance on the mature North American and European market, with very little exposure to growth markets, especially China, leading to a higher cyclicality compared to other Auto OEMs with a broader geographic portfolio; (3) challenges to integrate FCA and PSA and realize synergies, which will be a complex and time-consuming process; (4) substantial recurring structuring expenses resulting from the merger between FCA and PSA as well as the continued integration of Opel/Vauxhall and PCD; (5) transition risk of the industry towards alternative fuel vehicles and autonomous driving technologies.

LIQUIDITY

Moody's considers the liquidity profile to be excellent. At the end of September 2020, FCA reported approximately E26 billion of cash, cash equivalents and current debt securities, PSA reported approximately E16 billion at the end of August 2020. At the closing of the merger in early January 2021, including cash generated during the remainder of 2020 and after the payment of extraordinary dividends, Moody's expects cash and cash equivalents of around E40 billion for Stellantis.

Moody's expects the full availability of FCA's E6.3 billion committed revolving credit facilities (RCFs). The E3.1 billion tranche A of the RCF will be maturing in April 2023, the other E3.1 billion tranche B matures in March 2024. Moody's understands that PSA's committed covenanted syndicated credit facilities of E3.0 billion are also available to Stellantis. The majority of these facilities are maturing in May 2025.

These funding sources, totaling to almost E50 billion, should comfortably cover Stellantis's anticipated cash requirements over the next 12 months, which comprise principally capex, debt maturities, and cash for day-to-day needs.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Qualitatively, upward pressure on the Baa3 issuer rating could materialize if the company was able to swiftly manage the integration process of FCA and PSA, whilst being able to maintain its strong market positions in North America and Europe and enhance its geographical diversification beyond both regions. An upgrade would also require a continued roll-out of electrified models, especially at the FCA brands, in the context of tighter emission regulation within Stellantis' core markets and stable to slightly growing market share.

Quantitatively, an upgrade would require Stellantis to achieve (i) Moody's-adjusted EBITA margin (after restructuring cost) sustainably in the mid- to high single-digits in percentage terms, and (ii) Moody's-adjusted (gross) debt/EBITDA sustainably below 2.5x, and (iii) consistently positive and robust free cash flow above E1.0 billion annually.

The issuer rating could be downgraded if (i) Moody's adjusted EBITA margin (after restructuring) remained below 4%, or Moody's-adjusted debt/EBITDA remained above 3.5x, or (ii) free cash flow remained negative, or (iii) its liquidity profile were to weaken. Moreover, a sustained decline in Stellantis' market share would put pressure on the rating.

LIST OF AFFECTED RATINGS:

..Issuer: Fiat Chrysler Automobiles N.V.

Assignments:

.... LT Issuer Rating, Assigned Baa3

Upgrades:

....Other Short Term, Upgraded to (P)P-3 from (P)NP

....Senior Unsecured Medium-Term Note Program, Upgraded to (P)Baa3 from (P)Ba2

....Senior Unsecured Regular Bond/Debenture, Upgraded to Baa3 from Ba2

Withdrawals:

.... LT Corporate Family Rating, Withdrawn , previously rated Ba1

.... Probability of Default Rating, Withdrawn , previously rated Ba1-PD

Outlook Actions:

....Outlook, Changed To Stable From Developing

..Issuer: Fiat Chrysler Finance Europe SA

Upgrades:

....BACKED Other Short Term, Upgraded to (P)P-3 from (P)NP

....BACKED Senior Unsecured Medium-Term Note Program, Upgraded to (P)Baa3 from (P)Ba2

....BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to Baa3 from Ba2

Outlook Actions:

....Outlook, Changed To Stable From Developing

..Issuer: GIE PSA Tresorerie

Affirmations:

....Commercial Paper, Affirmed P-3

....BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

Outlook Actions:

....Outlook, Changed To Stable From Negative

..Issuer: Peugeot S.A.

Affirmations:

.... LT Issuer Rating, Affirmed Baa3

....BACKED Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa3

....BACKED Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

Outlook Actions:

....Outlook, Changed To Stable From Negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Automobile Manufacturer Industry published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062773. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

The merger of FCA and PSA is expected to be completed on 16 January 2021 to create Stellantis. Having its corporate seat in Amsterdam, the Netherlands, Stellantis will rank among the world's largest automotive manufacturers by volume. Its portfolio of automotive brands includes Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram and Maserati as well as Peugeot, Citroen, Opel, Vauxhall and DS Automobiles. In 2019 Stellantis sold 8.1 million units (including JV's) and on an unaudited pro forma basis it generated consolidated net revenues of E167 billion and operating profits of E9.6 billion (unaudited pro forma condensed figures as presented in the Prospectus filed on Nov 20, 2020).

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Matthias Heck, CFA VP - Senior Credit Officer Corporate Finance Group Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Anke Rindermann Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.