NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'BBB-' to $60 million of senior secured notes (the notes) issued by Station Place Securitization Trust, Series 2015-2 (the trust) maturing on May 15, 2017.
Jefferies Funding LLC (JFLLC), a wholly-owned subsidiary of Jefferies Group LLC. (Jefferies, rated 'BBB-/F3'; Outlook Stable by Fitch), will periodically sell assets to, and simultaneously agree to repurchase the same assets from, the trust pursuant to a master repurchase agreement. Jefferies has provided a full and unconditional guarantee of JEFLLC's payment obligations to the trust under the repurchase agreement. The trust has issued the notes, which are secured by the repurchase agreement assets 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 JFLLC 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, but 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.
RATING SENSITIVITIES
The rating assigned to the notes is equalized with Jefferies' senior unsecured debt rating, which is in turn equalized with the ratings of Jefferies' parent company, Leucadia National Corp. (Leucadia, rated 'BBB-' ; Outlook Stable). As a result, the rating assigned to the notes is sensitive to changes in the ratings of Jefferies and Leucadia.
For Jefferies, positive rating drivers over the longer term include improvement and stability in profitability and positive operating leverage through compensation cost containment while maintaining a conservative leverage and liquidity posture. A material increase in leverage or a less conservative liquidity and/or funding profile could pressure Jefferies' ratings. Additional negative rating drivers could include a material operational or trading loss, sustained underperformance in core business segments, and/or increased risk appetite at Jefferies Finance LLC, as measured by higher balance sheet leverage, larger deal commitments, and/or weakening credit quality.
Potential positive rating drivers for Leucadia could include demonstrated longer-term performance of the recent sizeable investments, reduced investment concentration, consistent operating performance with strong coverage of portfolio company cash flows to parent company expenses including dividends, while maintaining a conservative liquidity and leverage profile. Ratings could be negatively affected by increased concentration of investments, sustained weakening performance at portfolio companies leading to lower cash/dividend distributions, a fundamental shift in financial policy leading to increased debt relative to parent company liquidity or cash flows from portfolio companies, and/or a less conservative leverage profile.
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 Feb. 28, 2015, Jefferies had U.S. GAAP total assets of $43.7 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 2015-2
--$60 million senior secured notes maturing May 15, 2017 'BBB-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Non-Bank Financial Institutions Rating Criteria', (March 20, 2015);
--'Fitch Affirms Jefferies' 'BBB-/F3' Long- and Short-Term IDRs; Outlook Stable' (March 5, 2015);
--'Fitch Affirms Leucadia's Long-Term IDR at 'BBB-'; Outlook Stable' (March 5, 2015).
Applicable Criteria and Related Research:
Global Non-Bank Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865351
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984673
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.