Fitch Places Fidelity National Financial on Rating Watch Negative
May 18, 2005
CHICAGO --Fitch Ratings has placed the 'A-' insurer financial strength ratings of the title insurance underwriting subsidiaries of Fidelity National Financial, Inc. (FNF) and the 'BBB-' long-term issuer rating of FNF on Rating Watch Negative. In addition, the 'BB-' rating on the senior secured credit facility of FNF's subsidiary, Fidelity National Information Services (FIS), is affirmed.
Today's rating action follows the announcement that FNF plans to partially spin-off its title operations in the third quarter of 2005. In addition, the new title insurance holding company will borrow $500 million from a new bank facility and pay a special dividend to FNF. The Rating Watch primarily reflects the increased financial leverage at both the title insurance operations and in FNF overall.
Today's announced restructuring follows the recent recapitalization of both FNF and FIS, in which FIS raised capital through a bank facility and paid a large dividend to FNF. In addition, 25% of FIS was sold to two institutional investors. The debt at FIS is not guaranteed by FNF and, thus, is primarily rated on its own strengths and weaknesses.
Fitch views FNF's ratings and the title operations segregated from information services to determine FNF-only leverage and coverage that is supportive of the current ratings. There is also consideration for overall financial leverage. While Fitch believes the partial spin-off of the title operations does not change this view, the concern primarily resides with the non-FIS entities increasing willingness to leverage the consolidated balance sheet.
Fitch plans to review this transaction with management in the near term. Resolution of the Rating Watch will be based on management's plans regarding financial leverage on a consolidated basis and title insurance-only basis. If the new holding company is determined to maintain financial leverage in the mid-20s or lower, assuming no material change in overall financial leverage, then the ratings will likely be affirmed at the current level.
Fidelity National Title Insurance Co.
Fidelity National Title Insurance Co. of NY
Alamo Title Insurance Co. of TX
Nations Title Insurance of NY
Chicago Title Insurance Co.
Chicago Title Insurance Co. of OR
Security Union Title Insurance Co.
Ticor Title Insurance Co.
- Insurer financial strength affirmed at 'A-'; placed on Rating
- Fidelity National Financial Inc.
- Long-term issuer affirmed at 'BBB-'; placed on Rating Watch
- Fidelity National Information Services, Inc.
- Senior secured credit facility affirmed at 'BB-'; Stable
Source: Fitch Ratings