MOODY'S CONFIRMS DEBT RATINGS OF HOUSEHOLD INTERNATIONAL, INC. AND REVISES OUTLOOK TO STABLE FROM NEGATIVE; BENEFICIAL CORPORATION'S DEBT RATINGS CONFIRMED AND OUTLOOK IS STABLE
New York, 04-08-98 -- Moody's Investors Service today confirmed the debt ratings of Household International, Inc. (Senior at A3), and its principal operating subsidiary Household Finance Corporation (Senior at A2). The outlook for Household International and its subsidiaries has been revised to stable from negative. This rating confirmation and change in outlook follows the company's announcement that it would acquire Beneficial Corporation in a stock transaction for approximately $8 billion. Beneficial Corporation's debt ratings have been confirmed (Senior at A2) with a stable outlook.
Moody's stated that the rating confirmations for both companies, and the outlook change for Household, are based on the strengths of the combined organizations. These strengths include the expected operating efficiencies to be achieved with increased scale, the extensive branch network of over 1,300 offices in the United States, a stronger presence in the United Kingdom, and well-diversified earnings stream expected from the combined loan portfolios. Although there are significant benefits to be realized with the merger of the companies, the rating agency cautioned that execution risk remains as Beneficial is integrated into Household's operations. However, Moody's added that Household has been an active consolidator in the consumer finance industry and does not expect significant problems or interruptions to operations. The rating agency also believes Household will continue to pursue strategically focused acquisitions as opportunities arise.
The merger will be accomplished as a pooling of interests which, given Beneficial's stronger capitalization, improves Household's leverage profile on a pro forma basis. However, Moody's expects leverage to increase as the company manages toward its longer-term capitalization target of 7% tangible equity to managed assets.
On a combined basis, the companies will have pro forma 1997 managed receivables of $62 billion, managed revenues of over $7 billion, and over 30 million customer accounts.
The following ratings were confirmed:
Household International, Inc. – A3 for senior debt, Prime-2 commercial paper, Baa1 for senior subordinate debt, "baa1" for preferred stock, and A3 counterparty rating;
Household Finance Corporation – A2 for senior debt, Prime-1 for commercial paper, A3 for senior subordinate debt, "a3" for preferred stock, and A2 counterparty rating;
Household Bank, f.s.b. – A2 for senior debt, A2 for long-term bank deposits, Prime-1 for short-term deposits, notes, and other senior obligations, A3 for subordinated debt, and A2 counterparty rating;
Household Bank (Nevada), N.A. – A2 for senior debt, P-1 short-term senior obligations;
Household Financial Corporation Limited – A3 senior debt, P-2 Commercial Paper;
Household Global Funding, Inc. – "baa1" preferred stock;
Household International Netherlands B.V. – Senior at A3
Beneficial Corporation -- A2 for senior debt, Prime-1 commercial paper rating, and A2 counterparty rating;
Beneficial Bank plc -- A2 for senior debt, Prime-1 for commercial paper;
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