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Fitch Upgrades Springleaf to 'B-'; Outlook Stable



  Fitch Upgrades Springleaf to 'B-'; Outlook Stable

Business Wire

NEW YORK -- August 30, 2013

Fitch Ratings has upgraded the long-term Issuer Default Rating (IDR) and
senior unsecured debt ratings of Springleaf Finance Corporation (Springleaf)
to 'B-' from 'CCC' and assigned a Stable Rating Outlook. Fitch has also
upgraded the preferred stock ratings of AGFC Capital Trust I to 'CC/RR6' from
'C/RR6'.

KEY RATING DRIVERS

The rating upgrades primarily reflect the significant progress made by the
company toward repaying near-term debt and extending its liquidity runway,
combined with improved operating performance, highlighted by the return to
profitability in 2Q13. These improvements are counterbalanced by significant
remaining debt maturities in 2017, as well as the monoline nature of
Springleaf's business of lending to subprime consumers, which will attract
increased regulatory scrutiny.

Pro forma for actions taken subsequent to quarter end (e.g. secured loan
paydowns, real estate securitization, termination of swap positions), Fitch
estimates the company had $995 million of unrestricted cash at June 30, 2013,
which could be used to fund new loan originations and/or repay debt. The
company could also elect to sell a portion (or all) of its investment
portfolio ($546 million at June 30, 2013) or securitize unencumbered assets
(estimated pro forma $1.9 billion at June 30, 2013) in order to generate
incremental liquidity. Fitch believes the company has adequate sources of
liquidity to originate new loans and meet its debt obligations through 2016.

That said, Fitch remains concerned with the company's $5.1 billion of debt
maturing in 2017. Fitch expects the company to seek to refinance at least a
portion of this debt via the capital markets, although this strategy carries
execution risk, particularly in a rising rate environment. Absent refinancing
of a material portion of the debt, Fitch believes that Springleaf could be
challenged to meet its 2017 debt maturities.

Leverage, as measured by adjusted debt to adjusted tangible equity, declined
to 8.2x at June 30, 2013 from 9.2x in 2012. However, reported leverage is
calculated on a push-down accounting basis following the majority sale of
Springleaf to Fortress Investment Group LLC from American International Group,
Inc. in 2010. Fitch also views leverage on a historical cost basis, which adds
back the asset and debt discounts recorded as part of the application of
push-down accounting. On this basis, Fitch estimates leverage was 9.4x at June
30, 2013. Under both metrics, Fitch views Springleaf's leverage as improved,
but still higher than other subprime lenders.

The Stable Outlook reflects Fitch's view that Springleaf's liquidity profile,
leverage and operating performance have stabilized, and may potentially
improve over the near to intermediate term, absent a material market stress.

RATING SENSITIVITIES

Fitch believes additional upward rating momentum could potentially be
warranted if 2017 debt maturities are proactively addressed, profitability is
sustained over an extended period of time, asset quality is further improved,
and leverage declines to a level more in-line with higher rated consumer
finance companies. That said, potential upward momentum would likely be
limited to a below investment grade level, given Springleaf's monoline focus
on subprime consumer lending and the potential for increased regulatory
scrutiny.

Conversely, an inability to refinance existing debt at reasonable costs,
substantial credit quality deterioration, potential new and more onerous rules
and regulations, as well as potential shareholder-friendly actions given the
high private equity ownership, could generate negative rating momentum or may
result in notching the senior unsecured rating below the current IDR.

Fitch has upgraded the following ratings:

Springleaf Finance Corporation

--Long-term IDR to 'B-' from 'CCC'

- Senior unsecured debt to 'B-/RR4' from 'CCC/RR4'

AGFC Capital Trust I

--Preferred stock to 'CC/RR6' from 'C/RR6'

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--Global Financial Institutions Rating Criteria, Aug. 15, 2012;

--Finance and Leasing Companies Criteria, Dec. 11, 2012;

--Recovery Ratings for Financial Institutions, Aug. 19, 2013;

--Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Analysis, Dec. 13, 2012.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696720

Recovery Ratings for Financial Institutions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716302

Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit
Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696670

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=800920

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Brendan Sheehy
Director
+1-212-908-9138
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Johann Juan
Director
+1-312-368-3339
or
Committee Chairperson
Nathan Flanders
Managing Director
+1-212-908-0827
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
elizabeth.fogerty@fitchratings.com
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