MOODY'S UPGRADES CREDIT RATINGS OF FIRST TENNESSEE NATIONAL CORP. (SENIOR TO (P)A2), AND CONFIRMS RATINGS OF FIRST TENNESSEE BANK, N.A. (SENIOR AT A1)
Moody's Investors Service upgraded the ratings of First Tennessee National Corporation (FTNC) -- a bank holding company -- (senior to (P)A2 from (P)A3), and assigned a new Issuer Rating (A2) to it. Moody's also upgraded the subordinated debt of First Tennessee Bank, N.A. (FTB) -- FTNC's operating bank subsidiary -- to A2 from A3, and confirmed all of the bank's other ratings. The ratings outlooks for both FTNC and FTB remain stable.
Moody's said that the upgrading reflects the bank holding company's sound liquidity position, its limited dependence on dividends from its bank subsidiary, and its moderate double leverage. FTNC's unencumbered liquid assets -- consisting mostly of cash, and to a lesser extent of marketable securities -- exceed its short-term liabilities by a broad margin. Moreover, said Moody's, FTNC has good access to alternate liquidity sources, such as issuing senior debt or preferred stock under shelf-registrations, issuing new stock, or receiving dividends from -- or selling assets of -- nonbank subsidiaries.
Moody's noted that FTNC is capable of generating some revenues on its own, which mitigates its dependence on dividends from FTB. Interest income, dividends from nonbank subsidiaries, and other operating income covered about half of FTNC's total operating expenses in 1999. Moody's stressed that FTNC's own revenues reduce, but they do not eliminate, the holding company's reliance on bank subsidiary dividends. FTNC's double-leverage at about 109% is modestly high, said Moody's, but it is still in line with the peer-group average.
The upgrading of FTB's subordinated debt to one notch below the bank's A1 senior debt rating and the confirmation of the bank's other ratings reflect FTB's continued sound financial fundamentals and credit quality, according to the rating agency. FTB's earnings in 1Q00 declined because of poor performance by the mortgage financing and capital market units in a rising interest rate environment. However, the largest business unit --the regional banking division -- continued to produce strong results and further improvements in ROA. FTB's asset quality and liquidity remain healthy, said Moody's, and the bank holds the top deposit market share in Tennessee. FTB's operating expenses, however, are high relative to peers.
The issuers and related rating actions are the following:
First Tennessee National Corporation
- senior unsecured debt shelf: to (P)A2 from (P)A3
- subordinated debt: to A3 from Baa1
- subordinated and junior subordinated debt shelf: to (P) A3 from (P)Baa1
- cumulative preferred stock shelf: to (P) "a2" from (P)"a3"
- noncumulative preferred stock shelf: to (P) "a3" from (P) "baa1"
- issuer rating: A2 (new)
First Tennessee Bank N.A.
- long-term senior debt, deposit,
other senior obligations, and issuer ratings A1 confirmed
- subordinated debt: to A2 from A3
- short-term deposits and other senior obligations: P-1 confirmed
- bank financial strength rating: C+ confirmed
First Tennessee Capital I
- cumulative preferred stock: to "a2" from "a3"
- cumulative preferred stock shelf (P)"a2" from (P)"a3"
First Tennessee Capital II, III, and IV
- cumulative preferred stock shelf: to (P)"a2" from (P)"a3"
The Memphis, TN, headquartered First Tennessee National Corporation is a diversified bank holding company with consolidated total assets and equity of $19 billion and $1.2 billion, respectively, reported at March 31, 2000.
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