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Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Susan Saline who wrote (14373)	5/22/1998 5:08:00 PM
From: Beachside Bill	Respond to of 53068

Ok. Sue for the Z, will show a stop in VVUS at 10 1/4.

To: Susan Saline who wrote (14373)	5/23/1998 9:02:00 AM
From: Susan Saline	Read Replies (2) \| Respond to of 53068

about the Z and me and our CD 15:14 05-22-98 Fitch IBCA affirms Cendant unit ratings NEW YORK, May 22 - PHH Corp.'s senior debt is affirmed at 'A+' and commercial paper (CP) program at 'F1' by Fitch IBCA and removed from RatingAlert negative, where they were placed earlier this year. The affirmations follow a detailed review of the company and its ultimate parent, Cendant Corp. The ratings were affirmed based on PHH's strong operating fundamentals, including solid asset quality, good profitability and appropriate financial leverage. Additional comfort is provided by the financial firewall erected between PHH and Cendant, which limit dividends and inter- company loans to Cendant to 40% of PHH's prior year net income. Moreover, Cendant management has publicly committed to keep PHH's debt to equity below 8:1 times (x). Rating concerns center on PHH's dependence on short-term debt to fund operations and the interest rate sensitivity some of its businesses. Approximately $5.8 billion of debt is affected by Fitch IBCA's actions. Fitch IBCA placed PHH's senior debt on RatingAlert negative on Jan. 29, 1998, following Cendant's unsolicited bid for American Bankers Insurance Group Inc. (ABIG). The RatingAlert was triggered by Fitch IBCA's concern that Cendant's rapid growth through acquisition could adversely impact on PHH's credit risk profile. On April 20, 1998, Fitch IBCA placed PHH's CP on RatingAlert negative, following the disclosure of alleged accounting irregularities at the former CUC International, which merged with HFS, Inc. in December 1997 to form Cendant. The alleged accounting irregularities occurred in CUC's Alliance Marketing division and involve the improper matching of revenues and expenses from the sale of membership clubs. While the alleged accounting irregularities are a concern, Fitch IBCA recognizes that management has taken swift and decisive action to contain this problem including the installation of new management for the Alliance Marketing division and the centralization of the corporate accounting function in Parsippany, NJ. Moreover, the scope of this problem is relatively modest when compared to the rest of Cendant. Following the completion of a forensic audit by Arthur Andersen & Co., Cendant will restate its 1995-1997 operating results. Management believes the company's 1997 pretax income prior to merger-related charges will be reduced by roughly $185 million from $1.4 billion. In addition, management has committed to curtail its acquisition activity in 1998 other than those transactions already announced. Fitch IBCA believes the curtailment of acquisition activity in 1998 will allow Cendant to digest the transactions already closed or about to be closed without the distraction of new transactions. Going forward, Fitch IBCA believes Cendant's operating performance could improve and accelerate over historical levels as the company is able to capitalize on the synergies available in its businesses. Despite the large fee component of its businesses, Fitch IBCA believes some of Cendant's businesses are cyclical and a large rise in interest rates could adversely impact overall operating performance. Since being acquired by HFS in April 1997, PHH's operating performance has been at record levels. The acquisition by HFS allowed PHH to take out costs from its businesses that it would not have been able to accomplish as an independent company as well as gain scale in the relocation business. As a result, prior to merger charges, PHH's return on managed assets and return on equity were approximately 0.55% and 23.00%, respectively, for 1997. Leverage declined to 6.87 times (x) at Dec. 31, 1997 from 7.36x at Dec. 31, 1996 and asset quality remained strong. These trends have continued into 1998. Like Cendant, some of PHH's business is interest rate sensitive. However, potential business cyclicality is factored into the ratings. Nevertheless, significant business deterioration at PHH or Cendant would result in a review of the ratings.