Countrywide Affirmed By Fitch IBCA After Balboa Acquisition.NEW YORK--(BUSINESS WIRE)--June 14, 1999-- Fitch IBCA IBCA International Braille Chess Association IBCA Institute of Burial and Cremation Administration IBCA Integrated Business Communications Alliance IBCA International Barbeque Cookers Association IBCA Department of Interior Board of Contract Appeals affirms its `A' senior debt, `A-' preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , and `F1' commercial paper ratings of Countrywide Home Loans, Inc. (Countrywide), a unit of Countrywide Credit Industries, Inc. (CCI CCI Chambre de Commerce et d'Industrie (France) CCI CAM (Complementary and Alternative Medicine) Citation Index CCI Chamber of Commerce and Industry (Western Australia) ). Countrywide's ratings reflect its market leadership in the U.S. mortgage banking industry, effective risk management, solid operating performance, and strengthened capital base. Concerns center on industry competition and commoditization Commoditization 1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market. 2. Making a product into a commodity. Notes: 1. , challenges related to diversification initiatives, and the valuation of its servicing portfolio. Countrywide's ratings are affirmed following today's announcement that CCI has agreed to purchase Balboa Life and Casualty Insurance group from Associates First Capital Corp. CCI will pay $425 million for Balboa, with the purchase price being funded by approximately $200 million of new common stock, or equivalent equity-related securities, along with unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. . Countrywide's intent to issue equity with this transaction reflects the company's commitment to maintain capital at levels consistent with the rating category. Fitch IBCA believes that this insurance acquisition is consistent with Countrywide's goal of becoming a one-stop, home-centric, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. provider that will enable the company to diversify its earnings base. While Countrywide currently maintains its own captive insurance Captive insurance companies are limited purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups, they sometimes also insure risks of the parent company's customers. agency, the Balboa acquisition should help the company vertically integrate and expand its insurance related offerings. Balboa is one of the leading writers of credit- related insurance in the nation, specializing in creditor- placed auto and homeowners insurance. Voluntary homeowners and life and disability products are also offered and are expected to become an area of emphasis. Despite this acquisition, Countrywide's mortgage-related businesses will remain the dominant source of earnings in the future. The purchase of Balboa does entail a level of integration risk, as Countrywide seeks to combine Balboa with its own insurance services. Also, the purchase of Balboa marks a departure from Countrywide's strategy of building its business operations in-house, although Fitch IBCA expects Countrywide to return to its traditional approach in the future. |
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