S&P Boosts Outlook on BB&T (BBT) to Stable; Cites Strong CCAR Result Apr 17, 2014 04:48PM

Standard & Poor's Ratings Services today said it revised its outlook on BB&T Corp. to stable from negative. At the same time, we affirmed the 'A-/A-2' long- and short-term issuer credit ratings on BB&T Corp. and the 'A/A-1' ratings on Branch Banking & Trust Co.

We revised our outlook on BB&T to stable after the Federal Reserve did not object to the bank's 2014 capital distribution plan, which it submitted as per the Comprehensive Capital Analysis and Review (CCAR). "We recognize that, during the past year, BB&T's management has substantially enhanced certain of its risk-management processes and systems," said Standard & Poor's credit analyst Sunsierre Newsome. This effort followed the Fed's rejection of BB&T's capital plan in the March 2013 CCAR process because of "qualitative" issues. At that time, we had revised our ratings outlook on BB&T to negative.

Positively, we note BB&T's capital strength in the Federal Reserve's Dodd-Frank Stress Test, the results of which were released on March 26. Under the Fed's severely adverse scenario, BB&T's Tier 1 common ratio was 8.4% at year-end 2015, significantly higher than the 5% minimum.

BB&T continues to exhibit good financial performance, as evidenced in the first-quarter 2014 results, which support current ratings. In the first quarter, BB&T reported net income of $501 million, down from $537 million in fourth-quarter 2013 (or $518 million adjusted for the sale of a consumer lending subsidiary), and a return on average assets of 1.29%.

Asset quality continues to improve. Nonperforming assets (NPAs), by our measure, declined to 2.01% of total loans and other real estate owned from 2.14% the previous quarter. The net charge-off ratio was manageable at 0.55%, although it rose 6 basis points (bps) from the previous quarter because of a process change that resulted in accelerated recognition of charge-offs in the nonprime automobile lending portfolio. The net interest margin contracted 4 bps to 3.52% as a result of an increase in the investment portfolio to comply with new proposed liquidity rules. We expect its consistent profitability, improving asset quality, and adequate capital to support the ratings.

"The stable outlook reflects our view of BB&T's strong fee-based income, improving asset quality, and consistent earnings performance that should support adequate capital levels," said Ms. Newsome. If the economy in the company's core markets weakens and adjusted NPAs, excluding restructured loans, climb to near 2.5%, if net-charge offs approach 1%, or if our risk-adjusted capital ratio (RAC) declines and remains less than 7%, we could lower the ratings. Alternatively, we could raise the ratings if BB&T's financial performance improves materially, with its RAC ratio rising and remaining consistently above 10%.

S&P Raises Outlook on Boise Cascade (BCC) to Positive Following Exit of Controlling Financial Sponsor Apr 16, 2014 04:25PM

Standard & Poor's Ratings Services said today it revised its rating outlook on Boise, Idaho-based Boise Cascade Co. (NYSE: BCC) to positive from stable and affirmed its 'B+' corporate credit rating on the company.

At the same time, we affirmed our 'B+' issue-level rating on the company's senior notes. The recovery rating remains '4', which indicates our expectation that lenders will receive average recovery (30% to 50%) in the event of a default.

We revised our rating outlook to positive from stable following the exit of the Boise Cascade's controlling financial sponsor. Based on public filings, affiliates of private equity firm Madison Dearborn Partners LLC no longer retain an interest in the company. The outlook revision also signals that the company's debt to EBITDA could improve to the low 2x area in 2014 from 2.7x in 2013.

"The positive outlook reflects our expectation for Boise Cascade's cash flow and leverage measures to strengthen in the next year along with increasing U.S. housing construction activity," said Standard & Poor's credit analyst Tobias Crabtree.

We would upgrade Boise Cascade if the company's liquidity were to remain strong and its cash flow and leverage measures continue to improve such that leverage is likely to decrease below 2x concurrent with U.S. housing starts returning to average historical levels of about 1.5 million units per year. Under this scenario, we would anticipate Boise Cascade being able to maintain cash flow and leverage measures more in line with a one-notch higher rating through the cycle (i.e., debt to EBITDA on average in the low 3x area).

A revision back to a stable outlook could occur if growth in housing markets were to fall below our expectations and a more competitive pricing environment for wood products were to occur such that EBITDA declined in 2014 and 2015 from 2013's level. Alternatively, if the company's financial policies became more aggressive, leading to a revision in its liquidity to "adequate," we could also revise the outlook back to stable.

S&P Raises VeriSign (VRSN) to 'BB+' Following Reassessment of Financial Profile Apr 16, 2014 03:21PM

Standard & Poor's Ratings Services today said it raised its corporate credit rating on VeriSign Inc. (Nasdaq: VRSN) to 'BB+' from 'BB'. The outlook is stable. At the same time, we raised the rating on the company's senior unsecured notes to 'BB+' from 'BB'. The recovery rating of '3' on the notes remains unchanged, indicating our expectation of meaningful recovery (50% to 70%) for noteholders in the event of a payment default.

"The upgrade reflects our reassessment of the company's financial profile," said Standard & Poor's credit analyst Phil Schrank. "VeriSign has significant surplus cash, and we expect that its cash flow and leverage metrics will remain solidly within the range for its 'minimal' financial risk profile," he added, "with adequate headroom to make moderate acquisitions to expand its technology portfolio or client footprint."

Our assessment of the company's "fair" business risk is based on its relatively narrow business focus and limited diversity, partly offset by its good market position and significant base of recurring revenues. Other factors that contribute to our assessment of VeriSign's business risk profile are its "low" country risk and "intermediate" industry risk.

Our stable outlook reflects our expectation that the company will maintain its market position and good operating performance over the intermediate term.

A more aggressive financial policy, which would include debt-financed acquisitions or shareholder return initiatives that would cause leverage to be sustained in excess of 2x, could lead to a lower rating.

VeriSign's relatively narrow business focus limits the possibility of an upgrade to investment grade over the near term.

Fitch Affirms Ratings on AmEx (AXP); Sees Operating Performance Improving in FY14 Apr 16, 2014 02:15PM

Fitch Ratings has affirmed American Express Company's (NYSE: AXP) long-term Issuer Default Rating (IDR) at 'A+' and short-term IDR at 'F1'. The Rating Outlook is Stable. A full list of ratings is detailed at the end of this release.

The ratings affirmation reflects AXP's strong franchise, spend-centric business model, leading market position in the payments industry, strong credit performance, consistent profitability, diverse funding base, ample liquidity, and strong risk-adjusted capitalization. Ratings are constrained by limited revenue diversity and heightened legislative scrutiny of consumer products.


Fitch expects operating performance to continue to improve in 2014 supported by growth in consumer and business spending, an expanding Card Member base, and expense discipline. Fitch also expects the company to continue to invest in the franchise including strategic initiatives to expand key businesses (e.g. OPEN, Merchant Services, Serve, Bluebird) and develop new products and services. That said, some headwinds remain including a challenging economic backdrop, particularly in the U.S. and Europe, increased regulatory oversight, and intense competition from both traditional and alternative payment providers.

Credit performance is expected to remain strong in 2014 although charge-offs and delinquencies will likely start to increase from historically low levels. Fitch expects provision expenses to increase in 2014 driven by portfolio growth, lower reserve releases, and some modest deterioration in credit metrics. Net charge-offs on the lending portfolio improved 30 basis points (bps) to 1.8% in 2013 and were below other top credit card issuers. Reserve coverage remains strong at 1.9% of loans and 169% of loans past due at Dec. 31, 2013.

Capital ratios remained strong in 2013. The Tier I common ratio grew 60 bps to 12.5% in 2013 and the TCE/TA ratio improved 50 bps to 10.4% in 2013. Both metrics compare favorably to peer banks. Fitch expects capital ratios to remain stable as earnings generation is offset by asset growth and return of capital to shareholders (e.g. dividends, stock repurchases).

AXP's liquidity profile remains a rating strength, with approximately $13 billion (excluding CP and operating cash) of readily available cash and marketable securities at Dec. 31, 2013 to fund $12.5 billion of long-term debt and CD maturities over the next 12 months. The parent company has $1.3 billion of unsecured debt maturities in 2014, which compares to cash and equivalents and investment securities of $6.2 billion at year-end 2013 which Fitch believes is more than adequate to cover dividend and interest payments for the year.


Limited Upside in Ratings: Fitch believes positive rating momentum is relatively limited, given the company's strong ratings currently, concentrated exposure to consumers and focus on payment services.

Deteriorating Operating Performance: Negative rating action could be driven by a decline in earnings performance, resulting from a decrease in market share or an inability to contain costs, a weakening liquidity profile, significant reductions in capitalization, and/or potential new and more onerous rules and regulations. Negative rating momentum could also be driven by an inability of AXP to maintain its competitive position and earnings prospects in an increasingly digitized payment landscape.

Fitch has taken the following rating actions:

American Express Company
-- Long-term IDR affirmed at 'A+';
-- Short-term IDR affirmed at 'F1';
-- Short-term debt affirmed at 'F1';
-- Senior debt affirmed at 'A+';
-- Hybrid capital instrument affirmed at 'BBB';
-- Viability Rating affirmed at 'a+';
-- Support affirmed at '5'; and
-- Support Floor affirmed at 'NF'.

American Express Credit Corp.
-- Long-term IDR affirmed at 'A+';
-- Short-term IDR affirmed at 'F1';
-- Short-term debt affirmed at 'F1'; and
-- Senior debt affirmed at 'A+'.

American Express Centurion Bank
-- Long-term IDR affirmed at 'A+';
-- Short-term IDR affirmed at 'F1';
-- Senior debt affirmed at 'A+';
-- Long-term deposits affirmed at 'AA-'.
-- Short-term deposits affirmed at 'F1+';
-- Viability Rating affirmed at 'a+';
-- Support affirmed at '5'; and
-- Support Floor affirmed at 'NF'.

American Express Bank, FSB
-- Long-term IDR affirmed at 'A+';
-- Short-term IDR affirmed at 'F1';
-- Senior debt affirmed at 'A+';
-- Long-term deposits affirmed at 'AA-'.
-- Short-term deposits affirmed at 'F1+';
-- Viability Rating affirmed at 'a+';
-- Support affirmed at '5'; and
-- Support Floor affirmed at 'NF'.

American Express Travel Related Services Company, Inc.
-- Long-term IDR affirmed at 'A+'; and
-- Short-term IDR affirmed at 'F1'.

American Express Canada Credit Corp.
-- Long-term IDR affirmed at 'A+';
-- Short-term IDR affirmed at 'F1'; and
-- Senior debt affirmed at 'A+'.

The Rating Outlook is Stable.

S&P Affirms Bloomin' Brands (BLMN) at 'BB-"; Comments on New Credit Facility Apr 16, 2014 12:24PM

Standard & Poor's Ratings Services today assigned its 'BB+' issue-level rating to Bloomin' Brands Inc.'s (Nasdaq: BLMN) new $600 million credit facility, which consists of a $400 million revolving credit facility and a $200 million term loan A. The recovery rating is '1', indicating our expectation for substantial recovery (90%-100%) in the event of default.

At the same time, we affirmed all other ratings on Bloomin' Brands Inc. and its operating subsidiary, OSI Restaurant Partners LLC, including the 'BB-' corporate credit rating and the 'BB+' issue-level rating on the existing term loan B. The outlook remains positive. According to the company, it will use proceeds for the new facilities to pay down $400 million of the existing term loan B and pay the related fees and expenses associated with the transaction.

"The rating action reflects our expectation that operating performance trend will remain good in the next 12 months with positive same-store sales and unit expansion. We also believe the brand revitalization initiatives and cost savings from productivity improvements will contribute to further modest margin expansion in 2014 and 2015, despite commodity cost pressure and still-weak discretionary consumer spending," said credit analyst Helena Song. "We expect debt leverage will decline to the low-3x area in 2014 and further improve to around 3x in 2015, because of continued EBITDA growth and modest debt reduction from free operating cash flow."

The positive outlook on Bloomin' Brands reflects our expectation that continued positive operating momentum (mid- to high-single-digit revenue growth) will contribute to further strengthening of credit measures in the next 12 months, with debt leverage declining to the low-3x area in 2014 and further improving to around 3x at the end of 2015.

Upside scenario

We could raise the rating if the company achieves debt leverage of 3.2x and below on a sustained basis. This could occur if EBITDA grows by 10% on low-double-digit revenue growth and stable margins, while debt remains consistent. The financial risk profile would likely remain "significant" at the end of 2014.

Downside scenario

We could revise the outlook to stable if sales growth slows to 2% while gross margin declines 100 basis points. This would result in debt leverage in the 3.8x area and above. Although less likely, a negative rating action could also occur if the company adopts a more aggressive financial policy.

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