Investors let out a sigh of relief last week following the announcement of the $14.2 billion acquisition of Household International by British bank HSBC Holdings plc. While ABS spreads had yet to react much as of late Thursday, a number of combined factors signal positives for Household ABS holders after weeks of pressure following its settlement on predatory lending activities.
The most obvious positive comes from the higher corporate unsecured rating and more diverse finding base of the new parent. Upon announcement, both Moody's Investors Service and Standard & Poor's. took positive action on Household's single-A unsecured rating. "Upon the close of the transaction, the long-term and short-term credit ratings on Household likely will be raised one notch to A' and A-1', respectively, with a stable outlook," S&P said in its release. Fitch Ratings changed Household's outlook to evolving from negative.