Research Update: Mercedes-Benz Group AG 'A/A-1' Ratings Affirmed Following Implementation Of New Captive Finance Criteria; Off UCO

We have completed our ratings review of global premium carmaker Mercedes-Benz Group AG and its subsidiaries under our new criteria for issuers with captive finance operations (see "The Impact Of Captive Finance Operations On Nonfinancial Corporate Issuers," published Oct. 23, 2023). Although Mercedes' financial services operations have a meaningful exposure to residual value (RV) risk from their leasing business, representing more than 30% of the portfolio, we think the group has comprehensive RV risk management structures in place, along with a track record of successfully managing RV risk. We therefore affirmed our long- and short-term 'A/A-1' issuer credit ratings on Mercedes. At the same time, we affirmed our 'A/A-1' issue ratings on the group's senior unsecured debt, and removed all

...- We have completed our ratings review of global premium carmaker Mercedes-Benz Group AG and its subsidiaries under our new criteria for issuers with captive finance operations (see "The Impact Of Captive Finance Operations On Nonfinancial Corporate Issuers," published Oct. 23, 2023). - Although Mercedes' financial services operations have a meaningful exposure to residual value (RV) risk from their leasing business, representing more than 30% of the portfolio, we think the group has comprehensive RV risk management structures in place, along with a track record of successfully managing RV risk. - We therefore affirmed our long- and short-term 'A/A-1' issuer credit ratings on Mercedes. At the same time, we affirmed our 'A/A-1' issue ratings on the group's senior unsecured debt, and removed all our ratings from under criteria observation (UCO). - The stable outlook reflects our view that Mercedes will maintain an adjusted EBITDA margin well above 11% and free operating cash flow (FOCF) to...

Research Update