Fitch Rates National Rural's $1.5 Billion CTBs 'A+'.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 7, 2003 Fitch rates National Rural Utilities Cooperative Finance Corporation's (CFC CFC See: Controlled foreign corporation ) issuance of approximately $1.5 billion collateral trust bonds Collateral trust bonds A bond in which the issuer (often a holding company) grants investors a lien on stocks, notes, bonds, or other financial asset as security. Compare mortgage bond. (CTBs) 'A+'. This issuance is composed of: a floating-rate $400,000,000 tranche due in 2005; a 3% $600,000,000 tranche due in 2006; and a 3.875% $500,000,000 tranche due in 2008. Fitch also rates CFC's medium-term notes and guaranteed transactions are rated 'A', quarterly income capital securities 'A-', and commercial paper 'F1'. The Rating Outlook is Stable. The distinction between the CTBs and senior note ratings reflect the secured nature of the CTBs, while recognizing they are not issued out of a bankruptcy remote A company within a corporate group is said to be bankruptcy remote when the solvency of that company does not affect any other company in the group, particularly any holding company or subsidiary company of the bankruptcy remote vehicle. vehicle, thus linkage to the assessment of timeliness for senior unsecured notes is also a consideration. The ratings reflect CFC's favorable loss experience, reduced duration gap between its assets and liabilities, and restructuring its $1 billion non-performing loan A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. to Denton County Electric Cooperative (CoServ). The joint plans of liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy and reorganization filed by CoServ and CFC for real estate lending, telecommunications and electric distribution cooperatives are now effective and CoServ emerged from bankruptcy on Dec. 13, 2002. In addition, CFC has made significant progress on matching the duration of its assets and liabilities and Fitch expects that the use of short term funding in capital structure will be maintained in more appropriate ranges. The ratings are further supported by the contribution of more stable electric distribution loans, 56% as of Nov. 30, 2002, pricing flexibility, and seasoned management with sound industry experience and sector specific knowledge. Rating concerns include large obligor The individual who owes another person a certain debt or duty. The term obligor is often used interchangeably with debtor. obligor (ah-bluh-gore) n. concentrations, the potential for unsecured creditors to be in a relatively weaker position with increased use of CTBs, and relative illiquidity of the balance sheet. To a lesser extend, Fitch notes that coverage levels across CFC's borrower type have declined in aggregate. CFC is owned by it members which totaled 1,043 as of May 31, 2002 (826 Distribution systems, 71 generation and transmission, 146 associate members). CFC lends primarily on a secured basis (91% of total outstandings on May 31, 2002) typically sharing ratably in first mortgage collateral obtained by Rural Utilities Service (RUS). In addition, CFC is the principal source of financing for Rural Telephone Finance Cooperative (RTFC RTFC Rural Telephone Finance Cooperative RTFC Real Time Fiber Communications RTFC Read The Flipping Code (polite form) RTFC Read The Film Credits RTFC Read the Freaking Card (polite form; Magic, the Gathering) ), which CFC was previously a member of and combines for GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). purposes. |
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