Moody’s Investors Service (Moody’s) today placed on review for downgrade all ratings and assessments of Tesco Personal Finance plc (Tesco Bank) and its holding company Tesco Personal Finance Group plc (TPFG): Tesco Bank’s Baseline Credit Assessment (BCA) and Adjusted BCA of baa1, deposit ratings of Baa1/P-2, issuer ratings of Baa1/P-2, Counterparty Risk Ratings of Baa1/P-2 and Counterparty Risk Assessment of A3(cr)/P-2(cr); and TPFG’s Baa1/P-2 issuer ratings, Baa1 senior unsecured rating, and (P)Baa1 senior unsecured program ratings. Previously the outlook on the long-term deposit and issuer ratings of Tesco Bank and on the long-term issuer and senior unsecured ratings of TPFG was stable.

The rating action follows Tesco Plc’s announcement on 9 February 2024 that it had entered into an agreement with Barclays Bank UK PLC (Barclays Bank UK, A1 stable, a3) to sell its retail banking business, which includes credit cards, unsecured personal loans, deposits and related operating infrastructure[1][2].

The announced sale comprises GBP 4.2 billion gross credit card receivables, GBP 4.1 billion gross unsecured personal loans, and GBP 6.7 billion of deposits. The banks expect to close the transaction in the second half of 2024.


The review for downgrade reflects Moody’s expectation that following the transaction with Barclays Bank UK, the creditworthiness of the remaining bank will be materially weaker and therefore more closely aligned with the credit profile of its ultimate parent, Tesco Plc (Baa3 stable). Moody’s view reflects the fact that the announced transaction will be structured as a sale of the bank’s loan portfolio and deposits, which will leave the entity with a limited amount of assets and liabilities. In addition, the sale will meaningfully reduce protection to senior unsecured creditors of the bank’s holding company.

Moody’s expects the only outstanding unsecured notes issued by TPFG, with a nominal amount of approximately GBP 145 million, to be called on 25 July 2024, as indicated by the bank.

Considering that the ratings have been placed on review for downgrade, upward rating pressure is unlikely. The ratings could be confirmed if the transaction is not consummated.

The ratings could be downgraded if the acquisition is completed and Moody’s concludes that protection currently afforded to the holding company’s senior unsecured creditors is meaningfully reduced and if the standalone creditworthiness of Tesco Bank following the sale is materially weaker

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