Fitch Ratings Affs Metris Companies; Revises Outlook to Neg.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 4, 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 Metris Companies Inc. (Metris) secured bank credit facility at `BB+' and senior debt at `BB'. In addition, the long- term deposit rating for Metris' wholly-owned banking subsidiary, Direct Merchants Credit Card Bank N.A. (DMCCB) is also affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. at `BB+'. The Rating Outlook has been revised to Negative from Stable. Fitch's ratings and affirmation continue to reflect the company's established niche in the credit card sector, adequate capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. for the assigned rating and sustained profitability. To date, Metris continues to grow its managed credit card portfolio, which stands at $11.9 billion at year end 2001, through both internal and external account originations. The company's capital structure is appropriate for the assigned rating and is augmented by the company's $393 million Series C 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. . Metris continues to be profitable, despite higher reserving due to increased credit losses. Fitch's ratings also incorporate Metris' focus on the low and moderate income segment of the consumer credit market, where loss and delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. rates are higher and less predictable. Fitch also recognizes Metris' more limited funding profile relative to traditional banking peers, as the company is more reliant on asset backed funding. Moreover, Fitch remains mindful mind·ful adj. Attentive; heedful: always mindful of family responsibilities. See Synonyms at careful. mind of the heightened regulatory scrutiny placed on consumer lending Consumer lending or consumer loans refers to any type of loan product that is not a mortgage; such as a car, boat, manufactured home, home equity loan, home equity line of credit, signature loan, signature line of credit, recreational vehicle, or Certificate of Deposit loans. practices and Metris will need to proactively manage its business and marketing activities to remain in compliance with new and emerging regulatory guidance. Fitch's Negative Outlook reflects the view that Metris will be challenged to manage credit quality and profitability throughout 2002. Metris has announced that its forecasted loss rate in 2002 will range between 12.7%-13.3% of average managed receivables, up from 11% during 2001. While some of this forecasted increase reflects a change in charge-off policy for accounts in consumer credit counseling Credit counseling (known in the United Kingdom as debt counselling) is a process offering education to consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education. and slower expected receivable growth, Fitch believes that given the uncertain economic environment, credit losses could exceed forecasted ranges which could impact profitability, if not offset through cost reductions. Metris Companies Inc. is a Minnesota-based marketer of consumer credit cards and related enhancement products. At Dec. 31, 2001, the company reported $11.9 billion of managed loans, and $1.1 billion of common and preferred equity. |
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