MOODY'S UPGRADES CREDIT RATINGS OF NATIONSBANK CORP. (SENIOR TO Aa3) FOLLOWING ACQUISITION OF BARNETT BANKS (SENIOR DEBT ALSO RAISED)
New York, 01-12-98 -- Moody's Investors Service upgraded the ratings (senior debt to Aa3) of NationsBank Corporation (NB). The rating action follows NB's acquisition of Barnett Banks, Inc. Barnett's debt ratings were also upgraded. According to Moody's, the acquisition significantly enhances NB's banking franchise, especially in the competitive and rapidly growing Florida markets.
On a combined basis, NB's balance sheet approximates $310 billion, increasing the firm's financial options and marketing capabilities. Furthermore, Barnett contributes a balanced and well-performing loan portfolio. Moody's added that, despite mandated branch divestitures, NB is expected to garner considerable synergies from the Barnett transaction by effectively leveraging its back-office expenses over an extensive national franchise.
As a result of this deal -- the latest in a string of large and expensive acquisitions -- NB continues to generate a significant portion of its revenue from traditional, core (deposit-taking and lending) sources. With the recent Montgomery Securities transaction, the company remains focused on growing its capital market operations. Nevertheless, the earnings contribution from these less predictable sources is expected to remain relatively modest.
Due to recent cash transactions, NB has added considerable goodwill; consequently, tangible capital coverage is comparatively thin, Moody's added. The Barnett transaction -- an exchange of shares that results in a curtailment of NB's stock buyback program -- should compensate for this somewhat. However, the rating agency pointed out, NB will continue to manage its capital with a shareholder focus.
The following ratings have been upgraded:
NationsBank Corporation -- senior long-term debt from A1 to Aa3, subordinated long-term debt from A2 to A1, and counterparty from A1 to Aa3.
NationsBank, N.A. -- long-term bank deposits from Aa3 to Aa2, and counterparty and other senior obligations from Aa3 to Aa2; and B+ bank financial strength rating is confirmed.
NationsBank of Delaware, N.A. -- long-term bank deposits from Aa3 to Aa2, and counterparty and other senior obligations from Aa3 to Aa2; and C+ bank financial strength rating is confirmed.
NationsBank of Tennessee, N.A. -- long-term bank deposits from Aa3 to Aa2, and counterparty and other senior obligations from Aa3 to Aa2; and financial strength rating from C+ to B.
NationsBank of Texas, N.A. -- long-term bank deposits from Aa3 to Aa2, senior long-term debt from Aa3 to Aa2; counterparty and other senior obligations from Aa3 to Aa2; and B bank financial strength rating is confirmed.
NB Capital Trust I, II, III, IV -- preferred stock from "a1" to "aa3".
Barnett Banks, Inc. -- senior long-term debt from A2 to Aa3; subordinated long-term debt from A3 to A1.
Barnett Bank, N.A. – long-term bank deposits from A1 to Aa2; senior long-term debt from A1 to Aa2; counterparty and other senior obligations from A1 to Aa2; and B bank financial strength rating is confirmed.
Barnett Capital I, II, III -- preferred stock from "a2" to "aa3".
NationsBank Corporation, having just completed the Barnett acquisition, has total assets of approximately $310 billion. The company is based in Charlotte, NC.
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