Cendant's Rtgs Affd Following Recent Announcements; Outlook Stable.Business Editors NEW YORK--(BUSINESS WIRE)--Nov. 3, 2000 Fitch's ratings of Cendant Corporation are affirmed following Cendant's recent announcements to purchase Fairfield Communities, Inc. for approximately $635 million; to distribute 100% of the stock of a new company incorporating its individual membership and loyalty businesses to its shareholders in a tax-free distribution; and to sell Move.com to Homestore.com, Inc. for stock valued at $761 million. Ratings affirmed are Cendant's senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. at `BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +', subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". at `BBB', FELINE feline of, or pertaining to, members of the family Felidae. See also cat. feline agranulocytosis see feline panleukopenia (below). feline actinic dermatitis see solar dermatitis. PRIDES at `BBB' and commercial paper at `F2'. PHH PHH Provinciale Handelsschool Hasselt (school) PHH Pasukan Anti Huru-Hara (Anti Riot Task Force) PHH Phillips Head (screw) PHH Planar Halogenated Hydrocarbon Corporation's senior debt and commercial paper ratings are also affirmed at `A' and `F1', respectively. The Rating Outlook is Stable for both companies. However, a substantial change in the offer price of roughly $750 million for Avis Group Holdings Inc., a previously announced transaction, would cause a rating review. On Aug. 17, 2000, Fitch affirmed its ratings on Cendant and PHH following the announcement to buy the shares of Avis Cendant doesn't already own. Today's rating action anticipates minimal impact on leverage and cash flow as a result of these most recent transactions. The Fairfield acquisition is expected to be primarily financed with equity, and the company will provide sizeable EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become to partially replace cash flow lost from the spin-off of the membership and loyalty businesses. In addition, Fairfield provides potential synergies with the travel business, including combining marketing efforts with RCI RCI Royal Caribbean International RCI Radio Canada International RCI Rehabilitation Council of India RCI Residential Communities Initiative RCI Roof Consultants Institute RCI Remote Control Interface RCI Residential, Commercial, Industrial and new customer opportunities from Cendant's database. The sale of Move.com removes a cash drain from operations while obtaining a considerable investment in the leading Internet provider Internet provider - Internet Service Provider of real estate related products and services. Cendant's ratings also consider the diverse nature and stability of its core travel and real estate segments, the $2.85 billion settlement of a shareholder class-action lawsuit, and the expectation that future acquisitions and stock repurchases will not result in a material change to the current financial profile. While the acquisition of Fairfield will present risks associated with the vacation ownership business, including the need to finance large receivable balances, Fairfield maintains a high quality receivable portfolio with a strong historical performance. In addition, Cendant provides added credit strength to Fairfield's operations. |
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