MOODY'S CONFIRMS RATINGS OF COMMERCIAL CREDIT COMPANY AND TRAVELERS GROUP INC.
New York, 6/9/1997 -- Moody's confirmed its A1 senior debt and P-1 commercial paper ratings of Commercial Credit Company (CCC) as well as the ratings for the Travelers Group Inc., following the announcement of CCC's acquisition of Security Pacific Financial Services (SPFS) from BankAmerica Corporation.
Moody's said the confirmation reflects strategic benefits associated with the acquisition, as well as CCC's demonstrated risk management capability. Moody's said the acquisition should provide CCC with opportunities for cost efficiencies and the leveraging of its investment in systems, as it integrates SPFS's 297 branches into its existing network of 859 branches. Additionally, CCC is expected to benefit from the increase in the scope of its consumer lending activities and the opportunity to cross-sell insurance products to SPFS customers. However, Moody's noted the challenges CCC faces in managing asset quality during a time of general credit deterioration in the consumer sector, and in managing the integration of SPFS. The relatively high purchase price, including approximately $300 million of goodwill, may place further pressure on CCC to maintain and enhance its profitability, Moody's said.
Funding for the purchase, composed of approximately $1.1 billion of new short and long term debt and $500 million of equity, will not materially change the capital structure of CCC, Moody's said. Moody's noted that the majority of loans in the Security Pacific portfolio are real estate secured and have exhibited more predictable performance than have unsecured personal and sales finance loans. Although SPFS has recently experienced above-average credit losses, CCC believes credit losses will be manageable through its more concerted collection efforts. Leverage at CCC is expected to increase through the remainder of 1997 as the company grows its receivables portfolio and could become a rating concern, particularly if SPFS's portfolio does not perform as expected, Moody's said. Moody's cited CCC's ownership by the Travelers Group along with its superior risk management capability as an additional factor which supports the ratings.
Travelers Group Inc., based in New York City, is one of the largest diversified financial services firms in the USA. Through its subsidiaries, Travelers Group is engaged primarily in commercial and personal lines property and casualty insurance (Travelers Property Casualty Group - lead companies rated Aa3 for insurance financial strength by Moody's), life insurance and related products (Travelers Insurance Company and Primerica Life Insurance Company, both rated Aa3 for insurance financial strength by Moody's), investment services (Smith Barney Holdings Inc., senior at A2), and consumer finance services (Commercial Credit). As of March 31, 1997, Travelers Group Inc. reported year-to-date revenues of $5.9 billion, total assets of $153.9 billion, and shareholders' equity of $12.9 billion.
Ratings confirmed are as follows:
Commercial Credit Company
A1 Senior Debt Rating
P-1 Commercial Paper Rating
Travelers Group Inc.
Aa3 Senior Debt Rating
A1 Junior Subordinated Debt Rating
"aa3" Preferred Stock Rating
P-1 Commercial Paper Rating
CCC, which has its headquarters in Baltimore, Maryland, had $9.7 billion of assets at March 31, 1997, including $8.5 billion of consumer receivables. CCC is a member of Travelers Group, a diversified financial services group with assets of $154 billion.
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