Fitch Affirms Leucadia's IDR at 'BB+'; Outlook to Negative.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed Leucadia National Corp.'s (Leucadia) Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'BB+' and revised the Rating Outlook to Negative from Positive. Approximately $1.8 billion of debt is affected by this action. The Outlook revision reflects recognition of a net loss of $2.5 billion for fiscal year 2008 resulting from a substantial overall decline in Leucadia's investment portfolio value over the last six months. Largest components of the net loss included a $400 million loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the , a $500 million loss from associated companies, and a write-off of a $1.6 billion deferred tax asset. Additionally, Leucadia's investment in Fortescue Metals Group Fortescue Metals is an Australian mining company set to become a major exporter of iron ore. The company has large holdings in the Pilbara region of Western Australia. The company is listed as FMG on the Australian Securities Exchange (ASX) and has shown spectacular share appreciation in (Fortescue), an iron ore mining concern located in Australia, fell by $900 million (after-tax) to $400 million. Because the Fortescue investment is accounted for as an available for sale security, the decline was recognized in shareholder's equity. Leucadia also incurred sizeable unrealized losses on its investments in Jefferies Group Inc. and AmeriCredit Corp. In Fitch's view, recognition of these losses has significantly weakened Leucadia's underlying liquidity and capitalization. Furthermore, cushions on Leucadia's tangible net worth Tangible Net Worth Total assets less intangible assets and total liabilities. Notes: In terms of a consumer, tangible net worth is the sum of all your tangible assets (cash, home, cars, etc). and leverage covenant requirements under the company's $100 million bank facility have also significantly declined. Fitch notes that the magnitude of further losses on investment assets remains a critical near-term rating factor, and, given recessionary economic conditions, underlying portfolio assets and concentration risk, Fitch believes that further near-term deterioration in capitalization and liquidity is highly likely. Recognition of losses that either materially weakens existing covenant cushions or that requires the company to pursue covenant relief would likely result in a rating downgrade. Under such a scenario, depending on Fitch's assessment of cashflow adequacy and portfolio assets to repay all classes of debt, the downgrade could exceed more than one notch and may include widening the existing notching between senior and 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". . Fitch recognizes that Leucadia is currently not under pressure to sell investment assets to reduce leverage or generate liquidity. As of Dec. 31, 2008, the company potentially had $1 billion of overall liquidity, which includes cash and current held for sale investment assets of $600 million and non-current, unpledged publicly traded investment assets of $500 million. Moreover, the $100 million committed bank facility remains undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely and Leucadia has current debt maturities totaling $250 million. Fitch has affirmed the following ratings of Leucadia National Corp.: --IDR at 'BB+'; --Senior debt at 'BB+'; --Senior subordinated debt at 'BB'; --Junior subordinated debt to at 'BB-'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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