S&P rates new AmeriCredit convertibles B

Standard & Poor's said it assigned its B rating to the $200 million convertible senior notes that mature on Nov. 15, 2023 issued by AmeriCredit Corp.

S&P said the ratings reflect the many challenges that the monoline sub-prime automobile lender still experiences. First-quarter fiscal 2004 financial results showed some signs that its business model was beginning to stabilize, but asset quality measures for the quarter were still mixed, and losses remain at high levels.

Although AmeriCredit earned $33.3 million for the first quarter, profitability remains below average, the agency said.

Additionally, the company recently renegotiated its warehouse facilities, revising one of its key covenants to an annualized managed net charge-off ratio for two consecutive quarters to 9% from 8%. This should provide an added safety margin should the company's annualized net charge-off ratio exceed expectations.

S&P said the more than $200 million debt that AmeriCredit has issued has a minimal affect on the company's leverage and represents only 10% of the company's significant $1.9 billion in equity.

S&P ratings assume that the company will call the $200 million senior debt that is due in April 2006 in April/May 2004; therefore, the net affect of the transaction will have no affect on leverage, said S&P credit analyst Lisa J. Archinow.

S&P said any material adverse credit trends, change in loss assumptions, further increases in initial credit enhancement requirements, or in additional liquidity pressures, could result in ratings being lowered. An outlook revision to stable would depend on the company stabilizing its business model over a meaningful period of time.

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