DBRS Finalizes Provisional DaimlerChrysler Financial Services Americas LLC Issuer Rating at BB (high), Trend Stable

DBRS has today finalized the provisional Issuer Rating of DaimlerChrysler Financial Services Americas LLC (CF or the Company), which was assigned on July 2, 2007, at BB (high). Concurrently, DBRS has finalized the provisional rating of BBB assigned to the Company’s proposed issuance of $4 billion of senior secured debt (First Lien Secured Credit Facility) and the provisional rating of BB assigned to the proposed $2 billion junior secured debt (Second Lien Secured Credit Facility). The trend on all ratings is Stable. DBRS views that the Company’s corporate governance policies, its operating arrangements and financial structure largely de-link the ratings of Chrysler LLC (Auto) and CF. However, given that the vast majority of CF’s revenues and business are sourced from Auto, a certain level of rating linkage remains. Finally, DBRS’s rating of CF is based on the expectation that substantive consolidation would not be likely should one of CF’s related entities enter into bankruptcy.

The Issuer Rating is based on the Company’s acceptable profitability, its overall sound capitalization, conservative leverage and stable, strong asset credit quality. The Company’s considerable capitalization and conservative leverage are significant positive rating factors. Despite the weakness at the auto company, CF continues to perform consistently. Revenues continued to trend positively over the recent three-year period; however, increased interest expense and the increased depreciation associated with higher-than-normal leasing activity have pressured earnings. Going forward, CF expects to reduce the amount of lease transactions, which should positively impact earnings in the medium to longer term. Asset quality remains strong and compares favorably to peers, owing to sound risk management practices and a low risk appetite. Further, after the transaction, the Company benefits from reduced, measurable and manageable residual risk exposure. Finally, DBRS considers Cerberus to be a strategic investor with a strong, hands-on, experienced management team that will likely benefit CF going forward.

Offsetting factors include CF’s North American, largely United States, concentration, which adds a level of exposure to the U.S. economy. Moreover, the Company’s concentration in Auto-related business exposes CF to potential earnings volatility in the event of a weakening of sales for Auto products. Additionally, although the Company has ample liquidity, the funding profile is considered a weakness, owed to the large presence of secured debt and the largely encumbered balance sheet.

DBRS’s rating of the First Lien Secured Credit Facility, which is two notches above the Issuer Rating, considers the priority of the First Lien and the improved recovery for the First Lien holder. DBRS has stressed the asset valuation of the security and has concluded that the anticipated recovery rate of the First Lien improves significantly from the base recovery rate. DBRS’s rating of the Second Lien Secured Facility, which is one notch below the Issuer Rating, considers the subordination of the Second Secured Lien. Based on the stress test, DBRS has concluded that a significant portion of the eligible collateral would be used to support the First Lien, notably reducing recovery prospects for the Second Lien.

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