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Non-Tech : Finova ( FNV) - How low will it go -- Ignore unavailable to you. Want to Upgrade?

To: Jon Khymn who wrote (26)	6/13/2000 8:48:00 AM
From: Chip Roos	Respond to of 82

<<NEW YORK, June 12 (Reuters) - The recent Chapter 11 bankruptcy filing by Sunterra Corp. <OWN.N> poses risks for one of its large creditors, FINOVA Capital Corp., but not so much that it will hinder a sale of its parent, FINOVA Group Inc., <FNV.N> Merrill Lynch & Co. said in a recent bond credit report. "Though the timing was, admittedly, unfortunate for FNV, we do not think OWN's problems will forestall the possibility of a sale of FNV," Merrill Lynch said. "Any potential purchase price will reflect the inherent credit quality of FNV's portfolio, including the exposure to OWN, and FNV's other 'watchlist' credits." Orlando, Fla.-based Sunterra, the world's No. 1 timeshare operator, has 90 resort locations and about 300,000 owners and members. It filed for Chapter 11 reorganization on May 31. Three weeks earlier, Scottsdale, Ariz.-based FINOVA Group said that banks did not renew $500 million of credit, that it would draw down backup credit facilities and it was looking at "strategic alternatives" that experts said included a possible sale of the company. Its stock and bonds fell 28 and 12 percent, respectively, the next day. Merrill Lynch estimated FINOVA Capital's exposure to Sunterra at over $100 million, one of its 10 largest exposures to a single company. It said FINOVA Capital is comfortable that the value of the collateral it holds will be sufficient to cover any exposure. Merrill Lynch said investors should realize that Sunterra's bankruptcy, standing alone, does not require FINOVA Capital to classify its exposure to the company as "non-accruing" or "non-performing." Nevertheless, it said, "OWN's troubles have clearly come at an inopportune time for FNV," and pose the following risks: -- the market will take a "dim view" if FINOVA attempts to classify its exposure to Sunterra as anything other than "non-accruing impaired," even if Sunterra makes payments; -- Sunterra owners and members may stop making payments to Sunterra, and FINOVA borrowers who are "somewhat concerned" about their investment may stop making payments to FINOVA, and -- if FINOVA forecloses on Sunterra collateral, it may have difficulty selling it to customers aware of Sunterra's financial problems. Still, Merrill Lynch said, a FINOVA sale is likely despite Sunterra's problems. "The recent problems at OWN have been another example of headline risk for FNV bondholders," Merrill Lynch said. "Such risks are likely to dog FNV and its investors until a sale is consummated. We remain comfortable that a prospective buyer will perform sufficient due-diligence to get comfortable with this exposure. Consequently, we believe a sale remains the likely resolution to FNV's current challenges." On May 9, Standard & Poor's said it may change FINOVA Capital's BBB-plus senior unsecured and A-2 commercial paper ratings. A day earlier, Moody's Investors Service on May 8 cut FINOVA Capital's senior debt rating to Baa2 from Baa1, and its short-term rating to Prime-3 from Prime-2, and changed its rating outlook to negative from stable. Moody's said FINOVA and its units have $11.5 billion of outstanding debt. >> Let's hope for a continued climb today....would love to get out at a profit! Chip