2009-11-23 22:51:03 -
Fitch Ratings has affirmed the ratings of People's United Financial (PBCT) and its subsidiaries following the announcement of PBCT's acquisition of Financial Federal Corporation (FIF). The Rating Outlook for PBCT remains Stable.
PBCT announced the purchase of FIF for $738 million in a stock and cash transaction. Fitch expected PBCT to deploy its excess capital following the two-step conversion from a mutually-held holding company and initial public offering in 2006.
From FIF's perspective the acquisition is viewed favorably. While the ongoing capital market dislocations have impacted all commercial lenders, including Financial Federal, in terms of reduced funding flexibility and higher funding costs, Fitch recognizes that one of the primary benefits and drivers of the sale of FIF is PBCT's access to lower
cost deposit-based funding. Consequently, Fitch expects that debt currently issued by FIF will be repaid upon acquisition or in due course thereafter. Other positive rating factors include the retention of legacy key FIF managers and the accretive impact to pro forma consolidated PBCT's earnings and capital position.
Asset quality remains a primary rating concern. Fitch expects near-term portfolio deterioration and weakening asset quality trends to continue especially in PBCT's commercial real estate segment of the loan portfolio. Despite modest deterioration of asset quality in the leasing assets of both entities, Fitch views this trend as manageable and within PBCT's current rating level. Charge-offs from both FIF and PBCT remain well below most peers.
The transaction is expected to close in the first quarter of 2010. Fitch believes PBCT has proven its ability to integrate acquired entities through its acquisition of Chittenden Corporation in 2008 which had a significantly larger level of assets. Once the transaction closes, Fitch expects to upgrade FIF's ratings to PBCT's rating level.
PBCT is a Connecticut-based $21 billion holding company of People's United Bank, the largest bank headquartered in New England. FIF is a $1.5 billion financial services company providing leasing services to small and medium sized businesses nationwide.
Fitch has affirmed the following ratings and with a Stable Outlook.
People's United Financial, Inc..
--Long-term Issuer Default Rating (IDR) at 'A-';
--Short-term IDR at 'F1';
--Individual Rating at 'B';
--Support affirmed at '5';
--Support Floor affirmed at 'NF'.
People's United Bank
--Long-term IDR at 'A-'
--Long-term Deposits at 'A';
--Short-term IDR at 'F1';
--Short-term Deposits at 'F1';
--Individual Rating at 'B';
--Subordinated Debt at 'BBB+';
--Support at '5';
--Support Floor at 'NF'.
Chittenden Corporation
--Subordinated Debt at 'BBB+'.
Concurrently, Fitch has placed the following ratings of Financial Federal Corporation and its subsidiaries on Rating Watch Positive.
Financial Federal Corporation
--Long-term IDR 'BBB+';
--Short-term IDR 'F2';
--Senior Debt 'BBB+';
--Short-term Debt 'F2'.
Financial Federal Credit Inc.
--Long-term IDR 'BBB+';
--Short-term IDR 'F2';
--Senior Debt 'BBB+';
--Short-term Debt 'F2'.
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Fitch RatingsEric Newell, CFA, 212-908-0769, New YorkKen
Ritz, 212-908-0368, New YorkWilliam Artz, 312-368-3178, ChicagoorMedia
Relations:Brian Bertsch, 212-908-0549, New YorkEmail:
brian.bertsch@fitchratings.com : mailto:brian.bertsch@fitchratings.com
