Moody's may boost Metris

Moody's Investors Service said it put on review for possible upgrade the ratings of Metris Cos., Inc. (senior unsecured at B3) and its bank subsidiary Direct Merchants Credit Card Bank NA (issuer at Ba3).

The rating action was in response to the announcement that Metris has agreed to be acquired by HSBC Finance Corp. (senior unsecured at A1) in an all-cash transaction valued at $1.6 billion. The ratings of HSBC Finance Corp. were affirmed and the outlook remains positive.

Moody's said the review of Metris' ratings reflects the potential benefits the acquisition would provide to Metris' creditors from HSBC Finance's substantially larger and more diversified earnings base as well as its stronger funding profile.

The affirmation of the ratings of HSBC Finance reflects the small scale of the Metris acquisition relative to HSBC Finance's $147 billion of managed assets and the company's long-standing expertise within credit cards and the sub- and near-prime consumer finance customer segments, Moody's noted, adding that it expects that HSBC Finance will continue to allocate appropriate levels of capital to its businesses as its balance sheet composition continues to evolve.

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