Fitch Downgrades AGFC Capital Trust I's Trust Preferred Securities to 'CC/RR6'
AGFC Capital Trust I is a special-purpose entity that was set up in 2007 to facilitate the issuance of trust preferred securities on behalf of Springleaf Financial Corporation (SFC).
KEY RATING DRIVERS - TRUST PREFERRED SECURITIES
The rating downgrades maintain the two-notch differential between AGFC's trust preferred securities and the Long-term Issuer Default Rating (IDR) of SFC, the parent company of AGFC Capital Trust I, reflecting the subordinated nature of the instrument and its poor recovery prospects. SFC was downgraded to 'B-' from 'B' on Nov. 16, 2015, following the completion of the company's acquisition of OneMain Financial Holdings, Inc. (OneMain).
This rating action concludes Fitch's rating actions with respect to the SFC/OneMain acquisition in November 2015, and does not reflect any further material developments of additional information since that time.
RATING SENSITIVITIES - TRUST PREFERRED SECURITIES
The ratings assigned to the trust preferred securities are primarily sensitive to changes in SFC's IDR and, to a lesser extent, the recovery prospects of the instrument.
That said, Fitch views further downgrades to the trust preferred securities as more limited because a downgrade to 'C' would represent nonperformance, so that even a further downgrade to SFC would not result in a downgrade to the trust preferred securities - unless they were to defer and Fitch believed that nonperformance would be sustained and not temporary. .
For additional details on the rating drivers and sensitivities for SFC, please refer to Fitch's rating action commentary dated Nov. 16, 2015, "Fitch Downgrades Springleaf to 'B-' Following Completion of OneMain Acquisition."
Fitch has downgraded the following ratings:
AGFC Capital Trust I
--Trust preferred securities to 'CC/RR6' from 'CCC/RR6' and removed from Rating Watch Negative.
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