Fitch Ratings Affs Block Financial's 'A/F1' Rtgs; Rtg Outlook Neg.Business Editors CHICAGO--(BUSINESS WIRE)--Sept. 5, 2002 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. affirms Block Financial Corp.'s (BFC BFC Buffalo Field Campaign (West Yellowstone, Montana) BFC Betty Ford Center BFC British Fashion Council BFC Bicycle Friendly Community BFC Bible Fellowship Church BFC Boavista Futebol Clube ) 'A' senior unsecured and 'F1' commercial paper ratings. The affirmation covers $1.1 billion of debt securities. The Rating Outlook remains Negative. BFC is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of H&R Block, Inc. (Block) and its ratings rely on the unconditional guarantee of all debt outstanding provided by its parent. Current ratings recognize Block's dominant market share in the paid-preparer tax market, improved cash flow coverage of interest and debt service payments, and a strong internal capital formation rate. The Negative Rating Outlook reflects Fitch's concerns regarding Block's weak risk-adjusted capitalization, accelerated growth in originations at Option One, its subprime mortgage subsidiary, and continued poor performance in the investment services segment, which includes investment advisory and broker-dealer operations housed in the subsidiary, H&R Block Financial Advisors. Heightened concern with capital reflects Fitch's discomfort with the aggressive growth in the mortgage segment, which has resulted in lower quality earnings and increases in mortgage-related assets that require greater capital support. Although asset quality in the mortgage business has historically been acceptable, the growth in originations and managed portfolio could place significant pressure on Block's servicing capabilities and asset quality. Additionally, prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. deteriorating conditions in the broker-dealer market have increased the risk of additional impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. to goodwill related to this segment. Fitch believes near term improvement in capital is needed to remain at the current rating levels. Based in Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , MO, H&R Block, Inc. is the country's largest tax preparation firm with over 10,000 offices worldwide. H&R Block Tax Services, Inc. handled approximately 14% of tax returns filed, including electronic filing, with the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. during the tax season ended April 15, 2002. |
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