MOODY'S CONFIRMS THE RATINGS OF ASSOCIATES FIRST CAPITAL (SENIOR UNSECURED AT A1); OUTLOOK REMAINS NEGATIVE
Moody's Investors Service today confirmed the debt ratings of Associates First Capital Corporation (The Associates)( Senior Unsecured at A1) and its subsidiaries, including its principal operating subsidiary, Associates Corporation of North America (Senior Unsecured at Aa3). The ratings confirmation follows the company's announcement that it will acquire Arcadia Financial Ltd. (Arcadia) for approximately $200 million plus a residual obligation. The outlook for The Associates' ratings remains negative.
Moody's said the confirmation of The Associates' ratings reflects the strength of the company's consumer and commercial finance franchises, healthy earnings and asset growth, and solid liquidity management. In addition, the rating agency believes the acquisition of Arcadia will fit nicely within The Associates' consumer finance franchise and should provide a solid platform for the company to expand its existing sub-prime auto finance business.
However, Moody's cautioned that the company's financial fundamentals, including its profitability, reserve coverage, and effective leverage, have weakened in recent periods. In particular, the company's pace of acquisitions and growth have significantly outstripped its capital formation, while deteriorating asset quality in two of its larger businesses will continue to pressure earnings. As such, the outlook for The Associates' ratings remains negative.
The following ratings were confirmed:
Associates First Capital Corporation -- senior unsecured at A1; subordinated debt A2; short-term at Prime-1.
Associates Corporation of North America -- senior unsecured at Aa3; subordinated debt at A1; issuer rating at Aa3; short-term at Prime-1.
AIC Corporation -- guaranteed senior unsecured at A1.
Associates Financial Services of PR, Inc. -- guaranteed short-term at Prime-1.
Associates First Capital B.V. -- guaranteed senior unsecured at A1; guaranteed subordinated debt at A2; guaranteed short-term at Prime-1.
Associates Capital Corporation plc -- guaranteed senior unsecured at A1; guaranteed subordinated debt at A2; guaranteed short-term at Prime-1.
Associates First Capital Corporation, headquarterd in Dallas, Texas, is a leading diversified finance company providing consumer and commercial finance, leasing, insurance, and related services. As of September 30, 1999, the company had total managed assets of $92.3 billion.
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