Finova credit ratings slide, bankruptcy an option
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Finova credit ratings slide, bankruptcy an option
NEW YORK, Dec 26 (Reuters) - The credit ratings of Finova Group Inc. (NYSE:FNV - news) and its units were slashed after the troubled lender said for the first time it may need to seek bankruptcy protection, if a plan that would excuse it from paying back all of its own debt falls through.
Standard & Poor's and Moody's Investors Service downgraded Finova's ratings after Scottsdale, Ariz.-based Finova on Thursday raised the possibility of a court-supervised ``reorganization.''
Finova, which lends mainly to small- and medium-sized businesses, according to a recent securities filing, has about $11.3 billion of bank and public bond debt.
S&P on Tuesday cut its senior unsecured debt ratings for Finova Capital Corp., Finova's principal operating unit, three notches to ``B,'' a medium junk grade, from ``BB.'' Its rating outlook is negative.
On Friday, Moody's cut its equivalent rating to ``Caa1,'' a low junk grade roughly two notches below S&P's new rating, from ``B3.''
Both agencies also cut several other Finova ratings, and Moody's said it may cut its ratings again.
Finova's stock fell 1/8, or 1 percent, to 11/16 on the New York Stock Exchange at mid-afternoon. It has fallen 98 percent this year, having closed last Dec. 31 at $35-1/2. Finova last month suspended its quarterly common stock dividend.
The company's 7.25 percent notes maturing in November 2004 were recently offered at 60 cents on the dollar, for a yield to maturity of about 23.6 percent.
Finova on Thursday said that it and Leucadia National Corp. (NYSE:LUK - news) plan to propose a ``comprehensive restructuring'' to Finova's bank lenders and public debtholders.
Leucadia, a New York-based holding company, agreed last week to invest up to $350 million in Finova.
Finova said the restructuring ``will likely entail a principal reduction in the form of debt forgiveness, an extension of some maturities and the granting by Finova, of security.''
The company said substantially all of its lenders will have to agree to the restructuring for Finova to avoid possible ``reorganization under protection of the courts.''
In a filing with the Securities and Exchange Commission last Thursday, Leucadia said Finova has about $4.7 billion of bank debt and about $6.6 billion of public bond debt.
Finova first said in May it was exploring ``strategic alternatives'' including, at minimum, asset sales. |
