Fitch has lowered the senior rating of Providian Financial Corp to `B+’ from `BB-‘ and trust preferred rating to `CCC+’ from `B’.
The ratings for Providian National Bank remain unchanged. The ratings for both entities have been placed on Rating Watch Negative. A complete list of affected ratings is detailed below. Rating Watch Negative denotes Fitch’s view that ratings may be maintained at current levels or lowered upon further review.
Fitch’s downgrade of the holding company ratings reflects that unsecured creditors have less asset protection as liquidity at the holding company has diminished greater than anticipated. Fitch does recognize that near-term obligations of Providian will likely be met, however, longer term prospects will depend on the financial strength of the overall enterprise. There is approximately $851 million of senior debt issued out of the holding company, through the issuance of two convertible note issues.
The Rating Watch designation signifies Fitch’s concern surrounding the completion of certain restructuring objectives, namely asset sales, to improve the company’s financial profile. Providian continues its efforts to sell international operations in the U.K. and Argentina and is working to structure a possible sale of approximately $3 billion of `High Risk’ receivables and while the sale of the High Risk portfolio would likely limit future exposure to this portfolio, Fitch believes that a sale of these receivables would require a significant discount and result in a sizable loss for the company.
The Rating Watch also reflects the continued challenges facing the company’s liquidity profile as access to its traditional funding sources remains constrained. Fitch would expect that resolution of the Rating Watch would follow the progress of certain strategic objectives expected to be completed during the first quarter 2002. Failure to implement the necessary restructuring initiatives could further impair the ratings of Providian and PNB. Ratings lowered and placed on Rating Watch Negative: Providian Financial Corp. — Senior debt to `B+’ from `BB-‘; — Subordinated debt to `B-‘ from `B’; — Individual to `D/E’ from `D’ . Providian Capital I — Trust preferred to `CCC+’ from `B’. Ratings placed on Rating Watch Negative Providian Financial Corp. — Short-term `B’. Providian National Bank — Long-term deposits `BB’; — Short-term deposits `B’; — Senior debt `BB-‘; — Subordinated debt `B’; — Individual `D’.Details