OREANDA-NEWS. Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings (IDRs) for Private Export Funding Corporation (PEFCO) at 'AAA/F1+', respectively. The Rating Outlook is Stable. Fitch has also affirmed the 'AAA' rating on PEFCO's secured debt and the 'F1+' rating on its commercial paper. Fitch's ratings and Stable Outlook are underpinned by PEFCO's relationship with the United States' export credit agency, Export-Import Bank of the United States (Ex-Im), which is backed by the U.S. Treasury.

Although Ex-Im experienced a lapse in authority at the end of June 2015 due to a lack of reauthorization by the U.S. Congress, the guarantees that Ex-Im has on PEFCO's underlying loans and secured bonds remain in force over the life of the obligations. In October 2015, the U.S. House of Representatives voted to re-authorize Ex-Im in House Resolution 597 (Export-Import Bank Reform and Reauthorization Act of 2015). The U.S. Senate may include Ex-Im's reauthorization in the Surface Transportation Reauthorization and Reform Act of 2015; however, the legislation has not yet been finalized or signed into law. A full list of rating actions follows at the end of this press release.

Fitch's Support Rating and Stable Outlook reflect Fitch's expectation of an extremely high level of government support in the near- to intermediate-term irrespective of the prospects of Ex-Im reauthorization. PEFCO's long-term IDR is at its Support Rating Floor of 'AAA' and therefore is not likely to be downgraded unless Fitch changes its view of support.

These linkages are further articulated in Fitch's report 'Rating Linkages to the U.S. Sovereign Rating', dated July 18, 2011, and the Sovereign Support Section (Section III) of the report 'Global Non-Bank Financial Institutions Rating Criteria', dated April 28, 2015.

KEY RATING DRIVERS - IDRs, SECURED DEBT, COMMERCIAL PAPER, SUPPORT RATINGS, SUPPORT RATING FLOORS

PEFCO's ratings are directly linked to the U.S. sovereign rating (IDRs of 'AAA/F1+'; Outlook Stable), based on Fitch's view on U.S. government's financial support for Ex-Im. PEFCO partners with commercial banks and other entities to fund U.S. exports in sectors such as aircraft, energy, small business, equipment, infrastructure and telecommunications. As a privately owned corporation that was created with the support of U.S. Treasury and Ex-Im, PEFCO achieves this mandate by making or purchasing loans in the secondary market from commercial lenders. In Fitch's view, PEFCO is of highest credit quality as all loans made by PEFCO are guaranteed or insured by Ex-Im (or other U.S. government institutions), whose obligations are backed by the full faith and credit of the U.S. government.

Guarantee Agreements

A key rating driver and Fitch's rationale for aligning PEFCO's ratings to the U.S. sovereign rating is PEFCO's guarantee agreements with Ex-Im. Under explicit agreements between Ex-Im and PEFCO, Ex-Im guarantees the principal and interest of all covered loans held by PEFCO and the interest payments on senior secured debt issued by PEFCO. All secured debt issued by PEFCO is collateralized by loans guaranteed by Ex-Im and is rated 'AAA'. PEFCO's Support Rating of '1' and Support Rating Floor of 'AAA' reflect Fitch's view that there is an extremely high probability of sovereign support for PEFCO through Ex-Im.

Guarantees through Maturity and Reputational Risk Mitigate Lapse in Ex-Im Authority

Fitch's ratings for PEFCO previously incorporated an expectation that Ex-Im would be reauthorized. However, Fitch's ratings also contemplated that the probability of government support of PEFCO would remain extremely high irrespective of Ex-Im's lack of re-authorization. This is because the Amended Guarantee and Credit Agreement, which governs Ex-Im's guarantee of PEFCO's loans and secured debt obligations, terminates at the end of 2020 but such termination does not impact the effectiveness of the guarantees throughout the remaining duration of the loans or secured debt obligations. In addition, due to the high level of reputation risk to U.S. sovereign debt, Fitch does not foresee a scenario where the U.S. government would not honor Ex-Im's existing obligations to PEFCO's secured note holders.

Multiple Sources of Liquidity

PEFCO's short-term IDR of 'F1+' corresponds to its long-term IDR of 'AAA' and reflects Fitch's view that PEFCO has the highest short-term credit quality. Notwithstanding government support, PEFCO's liquidity profile benefits from multiple sources of liquidity. Primary sources of liquidity include withdrawals of readily available cash, commercial paper issuance, cash that could be generated quickly via sales of high quality investment securities, reverse repurchase agreements with shareowner banks, additional asset sales from government guaranteed Ex-Im loans, and bank credit lines.

RATING SENSITIVITIES
IDRs, SECURED DEBT, COMMERCIAL PAPER, SUPPORT RATING, SUPPORT RATING FLOOR
PEFCO's ratings are highly sensitive to the U.S. sovereign rating and to the U.S. Congress's ability to reauthorize Ex-Im's charter over the near term. An unanticipated shift in PEFCO's fundamental business model towards non-U.S. government guaranteed lending or issuance of long-term unsecured funding would likely alter Fitch's view of support and result in negative rating actions.

Fitch has affirmed the following ratings:

Private Export Funding Corporation
--Long-term IDR at 'AAA'; Outlook Stable;
--Short-term IDR at 'F1+';
--Secured debt at 'AAA';
--Commercial Paper at 'F1+';
--Support at '1';
--Support floor at 'AAA'.