CHICAGO, May 9 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
placed the short- and long-term credit ratings for FINOVA Capital Corporation
(FINOVA) on Rating Watch-Down as a result of the company's announcement that
it will fund maturing commercial paper (CP) with its bank lines. In addition,
FINOVA announced that it has engaged Credit Suisse First Boston to seek
strategic alternatives for the company. DCR also downgraded its senior debt
rating from 'A-' (Single-A-Minus) to 'BBB' (Triple-B) but reaffirmed FINOVA's
commercial paper rating at 'D-2' (D-Two). The Rating Watch status reflects
adequate but constrained financial flexibility. The ratings, which are listed
below, affect approximately $11.5 billion in debt.
FINOVA announced today that it will draw down and extend the maturity of
its $1.6 billion bank credit facility. This action follows the company's
inability to obtain sufficient renewal commitments from its bank group. As a
result, the facility could no longer help to provide dollar-for-dollar backup
for FINOVA's $4.5 billion CP program. FINOVA's funding alternatives going
forward will include its bank lines, possible asset sales (structured either
as whole loan sales or securitizations) and the capital markets, to the extent
they remain
economical.
FINOVA's financial leverage has increased to uncomfortably high levels.
The debt-to-equity ratio increased from 5.6 times at March 31, 1999 to 6.7
times at March 31, 2000. In addition, portfolio asset quality has deteriorated
over the past several months. This decline is exacerbated by the company's
large credit exposures. Over the short term, management's ability to maintain
and build market confidence will be important in order to maintain the
company's meaningful presence in the U.S. commercial paper market. DCR will
closely monitor FINOVA's short-term liquidity situation on an ongoing basis.
FINOVA is a leading commercial finance company providing capital and
secured lending products to mid-sized businesses primarily in the United
States. The Scottsdale-based company has followed its clients selectively into
Canada, Mexico, the Caribbean and Europe. FINOVA is a balance-sheet lender
with minimal use of gain-on-sale accounting.
The company is wholly owned by and the principal subsidiary of the FINOVA
Group, Inc.
FINOVA's credit ratings downgraded include:
New Old
Commercial Paper D-2' (D-Two) 'D-2' (D-Two)
Sr. Notes/Medium-Term Notes 'BBB' (Triple-B) 'A-' (Single-A-Minus)
Euro Medium-Term Notes 'BBB' (Triple-B) 'A-' (Single-A-Minus)
TOPrS/MIPS 'BBB-' (Triple-B-Minus) 'BBB' (Triple-B)
For additional research on FINOVA, visit DCR's Web site at
http://www.dcrco.com (Quick Search: FINOVA). DCR's research is also available
on Bloomberg at DCR, FirstCall's BondCall Direct/Research Direct at
http://www.firstcall.com and Multex at http://www.multex.com, as well as
through other third-party providers.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
Brian P. Quinn, 312-368-5464,
quinn@dcrco.com, or Peter J. Shimkus, 312-368-2063,
shimkus@dcrco.com, all of DCR
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