London: Fitch Ratings has assigned Mubadala GE Capital Ltd’s (MGEC; A/Outlook Stable) $500m 3% notes and the global medium term note (MTN) programme under which the notes are issued a final rating of ‘A’.
Fitch in a statement said that the rating was in line with the expected rating assigned to the programme on 31 October 2014.
The notes are rated in line with MGEC’s long-term issuer default rating (IDR) of A reflecting their status as senior unsecured obligations. In common with MGEC’s long-term IDR the rating reflects Fitch’s view of a strong capacity and propensity on the part of MGEC’s 50:50 co-owners, Mubadala Development Company PJSC (Mubadala; AA/Outlook Stable) and GE Capital Corporation (GECC), to support it in case of need.
Fitch regards MGEC as strategically important to both Mubadala and GECC. The standalone creditworthiness of MGEC is viewed by Fitch as significantly weaker than the support-driven rating. However, a standalone assessment of MGEC is of limited value, in view of the role that it plays for the shareholders, with both of which it is highly integrated.
As the rating is aligned with MGEC’s IDR, it is primarily sensitive to a change in the IDR itself. Although not expected by Fitch, should either shareholder seek to dispose of its investment in MGEC, or evidence emerge of a disagreement between them over the joint venture’s future strategy, or should there be any other developments that may cast doubt on the willingness or ability of one or both shareholders to provide support to MGEC, the rating may be adversely affected.
Negative rating action may also be taken if MGEC becomes loss-making, thereby not delivering the return on investment envisaged by the shareholders, to the extent that this would impact the propensity of the shareholders to provide support, in case of need.
Positive rating action would most likely be driven by an improvement in Fitch’s assessment of the creditworthiness of the shareholders or by evidence of an even higher propensity of the shareholders to support MGEC, in case of need, than what has already been incorporated into MGEC’s ratings. Consistent profit growth leading to MGEC occupying a more significant proportion of the shareholders’ overall businesses could also be beneficial to ratings in the long term.