OREANDA-NEWS. March 25, 2016. Fitch Ratings has assigned Lincoln Finance Ltd's (LFL) senior secured notes a final rating of 'BB-', and their guarantor, Lincoln Financing Holdings Pte Ltd, a final Long-term Issuer Default Rating (IDR) of 'BB-' with a Stable Outlook.

LFHPL and LFL were established as part of the recent acquisition of LeasePlan Corporation NV (LeasePlan; BBB+/Outlook Stable) by a consortium of new owners. LeasePlan is a global leader in vehicle leasing, and also a licensed bank, regulated by De Nederlandsche Bank (DNB).

The ratings are in line with the expected ratings assigned on 3 February 2016, although under the final terms of the issue all of the debt has a five-year maturity as opposed to the previously expected five and seven-year mix. It is split between EUR1.25bn and USD400m tranches, with coupon rates of 6.875% and 7.375% respectively.

KEY RATING DRIVERS
IDR AND SENIOR DEBT
LeasePlan represents LFHPL's only significant asset, and neither LFHPL nor LFL will have material source of income other than dividends from LeasePlan. There are no cross-guarantees of debt between LFL and LeasePlan, and the ratings reflect the structural subordination of LFHPL and LFL creditors to those of LeasePlan. In Fitch's view, debt issued by LFL is sufficiently isolated from LeasePlan so that failure to service it, all else being equal, may have limited implications for the creditworthiness of LeasePlan. Consequently, the instrument rating is based on the standalone profile of LFL and the guarantor.

LFHPL commences its ownership of LeasePlan with an interest reserve account containing cash covering 2.5 years of coupon payments on the senior secured notes. This eases LFL's initial debt service pressure. LFHPL is also covenanted to maintain at least this same level of cash coverage in the interest reserve account thereafter. However, replenishment of this cash will be dependent both on LeasePlan's ongoing ability to generate profits, and on DNB approval for their distribution in dividend form.

Fitch does not expect LeasePlan to adopt a significantly different strategy under new ownership to that employed previously. Its recent results have been strong, with net income in 2015 of EUR442.5m and a common equity Tier 1 ratio at 31 December 2015 of 17%. Profits have since 2013 been boosted by gains on used vehicle sales in excess of longer-term norms, but operating performance has also been sound.

RATING SENSITIVITIES
IDR AND SENIOR DEBT
Both the IDR and the rating of the notes would be negatively sensitive to any significant depletion of liquidity within LFHPL which affects its ability to service its debt obligations. This would most likely be prompted by a material fall in earnings within LeasePlan restricting its capacity to pay dividends.

Positive rating action would likely stem from an accumulation of significant additional cash within LFHPL, accompanied by expectation of its retention there, as this would reduce the dependence of ongoing debt service on future LeasePlan dividends.

The ratings could also be sensitive to the addition of new liabilities or assets within LFHPL, but the impact would depend on the balance struck between increasing LFHPL's debt service obligations and diversifying its income away from reliance on LeasePlan dividends.