Fitch Affirms TD AMERITRADE's Long-Term IDR at 'BB+'; Outlook Stable

2008-04-04 22:32:51 -

- Fitch Ratings affirms the long-term Issuer Default Rating (IDR) of TD AMERITRADE Holdings (TD AMERTIRADE) at 'BB+'. The Rating Outlook remains Stable. At Dec. 31, 2007, debt outstanding was $1.47 billion.

The following ratings have been affirmed by Fitch:

TD AMERITRADE Holding Corporation:

--Long-term IDR 'BB+';

--Senior debt 'BB+';

Rating Outlook Stable.

The ratings of TD AMERITRADE recognize the operational strength of its online brokerage franchise and the financial leverage incurred to affect the acquisition of TD Waterhouse. Integration has been smooth, positively impacting operating leverage. Fitch recognizes the potential benefits of the diversification of its clients and further product expansion. However, earnings remain highly correlated to U.S. equity market trends and the equity appetite of U.S. retail investors. Fitch believes transaction volumes will decline for the remainder of 2008 at least given the weakening economy and challenges facing the U.S. consumer in general.

The ratings also recognize the relatively high financial leverage for a firm dependent upon retail equity trading appetite. Positive operating leverage in 2007 provided good interest coverage from high trading volumes. Debt was initially reduced through prepayments but such payments have been curtailed as management recognized the beneficial credit spread of the debt relative to current prices. Retained earnings increased capital although stock repurchases remain fairly aggressive. Cash on hand affords the company financial flexibility however, its historic acquisitive nature could result in a swift change in cash availability.

The Rating Outlook remains Stable. Fitch recognizes the positive earnings developments but remains cautious due to uncertainty in the U.S. economy. Several additional quarters of post-acquisition performance should highlight the earnings characteristics of the firm's altered business model in a more accurate manner.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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