DBRS Places DaimlerChrysler Financial Services Americas LLC Rating Under Review with Negative Implications

DBRS has today placed all ratings of DaimlerChrysler Financial Services Americas LLC (Chrysler Financial or the Company), including its Issuer Rating of BB (high) Under Review with Negative Implications.

This rating action reflects DBRS concerns regarding the escalating pressures on the Company’s operations resulting from the decline of auto sales of Chrysler Automotive, the weakened economic environment and depressed used vehicle prices. Moreover, this review also considers the impact of potential funding pressures and likely higher funding costs resulting from the Company’s ongoing efforts to renew its outstanding bank conduit facilities in the current stressed market environment. While DBRS believes the Company will be successful in replacing a majority of the conduit capacity, the new facility will likely increase the Company’s funding costs, thereby stressing the Company’s profitability.

Further, the DBRS review will focus on the financial impact of the previously announced exit from the auto lease origination business. DBRS is concerned that the discontinuation of lease products will have a negative impact on the Company’s loan origination volume, given leases accounted for approximately 20% of the Company's historic retail penetration. This review will also consider the financial impact of the overall weakening of the U.S. economy and the Company’s ability to handle higher credit costs. The continuing stress on household finances resulting from the increasing cost of food and energy, the deteriorating employment outlook and continued home price deflation, will likely impact the Company’s receivables book, increasing loss frequency. Moreover, loss severity will likely increase as used vehicle prices continue to weaken. Given the preponderance of larger vehicles in the Company’s retail book, DBRS expects higher losses in the loan book as well as significant weakness in residual values in the lease portfolio. Further, reduced sales volumes at the automotive company, will likely impact the dealer base, potentially increasing credit cost in the wholesale portfolio. Weakened demand for certain Chrysler products further exacerbates loss potential.

DBRS expects to resolve this review in the near term and notes that a multiple notch downgrade is possible.


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

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