NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'BBB-' to $100 million of senior secured notes (the notes) issued by Station Place Securitization Trust, Series 2014-1 (the trust) maturing in February 2016.
Jefferies International Limited (JIL), a wholly-owned subsidiary of Jefferies Group LLC (Jefferies, rated 'BBB-/F3'; Rating Outlook Stable by Fitch), will periodically sell securities assets to, and repurchase the same securities, from the trust pursuant to a master repurchase agreement. Jefferies has provided a full and unconditional guarantee of JIL's payment obligations to the trust under the repurchase agreement. The trust has issued the notes, which are secured by the repo securities as well as its rights under the repurchase agreement. The trust's payment obligations on the notes are not directly guaranteed by Jefferies.
KEY RATING DRIVERS
The rating on the notes is based entirely on the ratings of Jefferies. Fitch has given no consideration to any collateral provided, as Fitch has not evaluated, nor does it expect to review, the collateral policy or collateral assets backing the notes. Because Jefferies has fully and unconditionally guaranteed the due and punctual payment of all obligations of JIL to the trust under the repurchase agreement, it is Fitch's view that the notes rank pari passu with senior, unsecured obligations of Jefferies.
Fitch acknowledges that the issuance is backed by collateral. However, given that the collateral for the issuance can be substituted at any time according to the terms of the issuance, Fitch does not believe that the rating benefits from any uplift from the underlying collateral and equalizes the rating with Jefferies' senior unsecured debt rating due to the guarantee.
For Jefferies, positive rating drivers over the longer term include continued improvement and stability in profitability and compensation cost containment. Potential positive drivers specific to Leucadia include greater clarity regarding the firm's strategic objectives and eventual execution of those objectives, particularly with respect to the deployment of its excess capital. Demonstrated commitment to a conservative liquidity profile, limited investment concentrations and modest leverage at the holding company would also be considered positive drivers. The interaction between Jefferies and Leucadia will continue to play an important role in the longer-term value and risk profile of the combined franchise, in Fitch's view.
Jefferies' and Leucadia's ratings could be negatively pressured by a material increase in leverage or a less conservative liquidity and/or funding profile at either entity. Jefferies' leverage remains at historically low levels and Fitch expects that over time, if markets remain stable, it may increase modestly. Ratings would also be negatively affected if Fitch perceives the risks taken in Leucadia's investment portfolio as increasing materially from current levels. Fitch will continue to assess the ability of Jefferies' management team to run both companies effectively. Furthermore, the unanticipated departure of key executives at either Jefferies or Leucadia could also result in negative actions.
Jefferies, a Delaware-incorporated holding company, is a full-service investment banking and institutional securities firm primarily serving middle-market clients and investors. Its primary broker/dealer operating subsidiary, Jefferies LLC, holds the vast majority of the firm's consolidated assets and is regulated by the SEC. At May 31, 2014, Jefferies had U.S. GAAP total assets of $43.6 billion and shareholders' equity of $5.5 billion (including non-controlling interests and $2 billion of goodwill). Fitch considers Jefferies to be a core subsidiary of Leucadia based on Jefferies' significance relative to Leucadia's equity and the likely role it will play in the combined company's future strategic direction.
Fitch has assigned the following rating:
Station Place Securitization Trust, Series 2014-1
--$100 million senior secured notes maturing February 2016 'BBB-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);
--'Securities Firms Criteria' (Jan. 31, 2014).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Securities Firms Criteria