Heller Financial Affd At `A/F1'; Rtg Outlook Stable By Fitch.Business Editors NEW YORK--(BUSINESS WIRE)--June 14, 2001 Heller Financial, Inc.'s (Heller) senior debt, 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 commercial paper ratings are affirmed at `A', `A-`, and `F1', respectively by Fitch. The rating affirmations cover approximately $16 billion of debt and preferred stock securities and follow Fitch's annual review of Heller. The Rating Outlook is Stable. Heller's ratings reflect the company's well-defined operating strategy, business diversity and improving market positions, and conservative funding profile, including demonstrated portfolio liquidity. Rating concerns center on the sustainability of projected asset quality over an entire business cycle, asset growth exceeding internal capital formation, and the pressures of being a publicly owned Publicly owned can refer to:
Heller reported its eighth consecutive year of record earnings in 2000 with net income of $290 million a 23% increase over 1999's core net income of $236 million. Heller's improved operating performance was driven by a 23% rise in net interest income to $612 million and no growth in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . Despite the company's operational success, profitability remains somewhat constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. and below management's intermediate term return on common equity target of 15%. Profitability continues to be primarily held back by the cost of maintaining operating infrastructure in certain businesses which have not achieved scale. While steady progress has been achieved in improving the company's profitability since 1998, Fitch believes that Heller management will not engage in excessive risk-taking to achieve current profitability goals. Asset quality continues to be within expectations as net chargeoffs totaled 0.74% of average lending assets in 2000. Net chargeoffs rose in the first quarter of 2001 to 0.81% of average owned receivables annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. . This level is still below the high end of management's targeted range of 0.60%- 0.90%. The increase in losses in 2000 and 2001 reflect in part the general weakness of the domestic economy as well as the seasoning of some of Heller's newer business lines. Given the trend in non-accruing assets since year-end 1998, Heller's net chargeoffs could exceed 0.90% for at least one quarterly period in 2001, depending on the timing of loss recoveries. Nevertheless, Heller's general reserves of 2.23% of total lending assets at March 31, 2001, provides management with good flexibility in dealing with problem assets in future periods. While recognizing that Heller has completely redesigned its credit processes over the last nine years, Fitch remains cautious regarding the sustainability of Heller's asset quality trends in light of the large credit losses realized by the company during the last domestic recession. The combination of strong receivable growth, a large amount of goodwill, increased equity investments, and moderate internal capital formation have had an adverse impact on Heller's risk-adjusted capitalization and financial leverage at Dec. 31, 2000. Nevertheless, Heller's emphasis on maintaining significant readily available liquidity throughout 2000, coupled with a manageable amount of short- term debt, permitted the company to pursue business opportunities not available to many of its competitors due to funding constraints. Management's commitment to maintaining the company's solid balance sheet was demonstrated during the first half of 2001 when Heller refinanced its 8.125% $125 million of perpetual preferred stock with a 7.00% $175 million Mandatory Dividend Enhanced Securities (MEDS meds A popular term for physician-prescribed medications ) hybrid equity issue. This security was assigned equity credit of 90% and Heller used the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. $50 million of capital to support additional business growth. Established in 1919 and headquartered in Chicago, Heller Financial, Inc. is a diversified commercial finance company providing a broad range of financing products to principally U.S. middle market companies and small businesses, with annual revenues ranging from $5 million to $250 million. The Fuji Bank The Fuji Bank, Limited (株式会社富士銀行 Ltd. is Heller's biggest shareholder controlling 77% of the voting rights Voting rights The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors. voting rights The type of voting and the amount of control held by the owners of a class of stock. and 52% of the actual shares at Dec. 31, 2000. Although a Keepwell Agreement Keepwell Agreement A contract between a parent company and its subsidiary to maintain solvency and financial backing throughout the term set in the agreement. Notes: exists between Heller and Fuji, Fitch views Heller as a standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. credit. |
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