Associates First Capital Affirmed by Fitch IBCA; Outlook-Neg.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 28, 1999

Associates First Capital Corp.'s (AFCC) senior debt, subordinated debt, and commercial paper ratings are affirmed at `AA-`, `A+', and `F1+', respectively by Fitch IBCA following the company's announcement that it will acquire KeyCorp's $1.3 billion credit card in-market credit card business. The debt ratings for AFCC's subsidiaries, including Associates Corp. of North America (ACONA), were also affirmed. However, the rating outlook for AFCC and its subsidiaries has been revised from stable to negative, with the exception of the outlook for ACONA's commercial paper rating which is stable. The outlook change reflects Fitch IBCA's increasing concern about AFCC's capitalization, both on an absolute and risk-adjusted basis, and whether historical capital levels, which the company is managing to, are appropriate for the rating category, given the change in the company's risk profile. Approximately $67 billion of debt is affected by Fitch IBCA's actions.

AFCC plans to acquire KeyCorp's $1.3 billion credit card portfolio for total consideration of approximately $1.63 billion under an agent bank relationship. The purchase price is in the high end of the price range for recently announced agent bank transactions. Under the terms of the agreement, credit cards will be issued under the KeyCorp name in its geographic footprint with AFCC responsible for all credit approvals, pricing, funding, and back office services.

AFCC acquisition of KeyCorp's credit card business is consistent with its four-pronged bank card strategy. Under this strategy, the niche areas targeted for growth are: oil cards, private label, agent bank, and specialized, including the student credit card market. The KeyCorp transaction is the second major agent bank transaction announced by AFCC in 1999. Earlier in the year, AFCC established a similar relationship with Washington Mutual, Inc.

While recognizing AFCC's outstanding long-term operating record, Fitch IBCA's concerns about the company center on its capitalization, receivable growth, and asset quality, all of which are viewed as interrelated. While managed asset growth in the mid-teens has been a key component of AFCC's strategy, compounded annual growth has accelerated since year-end 1994 to over 20%. This level of growth, coupled with approximately $2 billion in goodwill arising from the acquisition of Avco Financial Services, Inc. 1999, has placed significant pressure on AFCC's capitalization and capital ratios. At Sept. 30, 1999, debt divided by tangible equity stood at 12.65x, well above the company's cyclical low of 9.53x at Dec. 31, 1997. Management has committed to bring this ratio into the 9.50x-10.00x range by June 30, 2000, without an inordinate amount of asset securitization. However, given the deterioration in asset quality, such levels may still not be sufficient for the current ratings category. Since peaking in 1994, asset quality has systematically declined as net chargeoffs as a percentage of average managed receivables totaled 2.74% at Sept. 30, 1999 up from 2.32% and 1.60% for 1997 and 1994, respectively. The increase in losses during a period of domestic economic strength indicates that AFCC's risk-profile has shifted to riskier assets.

Based in Irving, TX, AFCC is the largest publicly owned finance company in the world. The company provides consumer and commercial finance, leasing, insurance, and related services in the U.S. and 13 international markets.

     Ratings Summary - Associates First Capital Corp.

     Associates First Capital Corp.
     --   Senior Debt: `AA-`, Negative outlook
     --   Subordinated Debt: `A+', Negative
     --   Commercial Paper: `F1+', Negative

     Associates Corp. of North America
     --   Senior Debt: `AA', Negative outlook
     --   RHINOS: `AA-`, Negative
     --   Subordinated Debt: `AA-`, Negative
     --   Commercial Paper: `F1+', Stable

     AIC Corp.
     (Guaranteed by Associates First Capital Corp.)
     -- Senior Debt: `AA-`, Negative outlook
     -- Subordinated Debt: `A+', Negative
     Commercial Paper: `F1+', Negative

     Associates Capital Corp. plc
     (Guaranteed by Associates First Capital Corp.)
     --   Senior Debt: `AA-`, Negative outlook
     --   Subordinated Debt: `A+', Negative
     --   Commercial Paper: `F1+', Negative

     Associates First Capital  B.V.
     (Guaranteed by Associates First Capital Corp.)
     -- Senior Debt: `AA-`, Negative outlook
     -- Subordinated Debt: `A+', Negative
     -- Commercial Paper: `F1+', Negative

     Associates Financial Services of Puerto Rico, Inc.
     (Guaranteed by Associates Corp. of North America)
     -- Commercial Paper: `F1+', Stable