Fidelity National Financial Inc. Ratings Removed From Watch, Raised; Outlook Stable
March 10, 2006
NEW YORK (Standard & Poor's) --Standard & Poor's Ratings Services said today it raised its counterparty credit and senior debt ratings on Fidelity National Financial Inc. (NYSE:FNF) and Fidelity National Title Group Inc. (FNT) to 'BBB' from 'BBB-' and removed the ratings from CreditWatch positive where they were placed on Sept. 15, 2005.
At the same time, Standard & Poor's raised its counterparty credit and financial strength ratings on the seven title underwriters that constitute the Fidelity National Title Insurance Cos. Group (Fidelity Title) to 'A' from 'A-'.
The outlook is stable. The ratings on FNT are primarily based on the underlying counterparty credit and financial strength ratings on Fidelity Title.
"The rating actions on FNF and its related entities follows our removal of FNF's majority owned subsidiary Fidelity National Information Services Inc. (FIS) from CreditWatch where it was placed on Sept. 15, 2005," explained Standard & Poor's credit analyst Donovan Fraser. At the same time Standard & Poor's raised the corporate credit and senior secured ratings on FIS to 'BB+' from 'BB'.
"The rating actions follow the completed merger of FIS with Certegy Inc., which has combined operations to form a single publicly traded entity," added Mr. Fraser. The name of the combined company will become Fidelity National Information Services Inc.
The ratings reflect the new FIS' contribution of the company's prospective recurring revenue base, good cash-flow generation, and the opportunity to realize both product and cost synergies over time. "The merger over time is expected to enhance FIS' competitive position, and hence FNF's enterprise value, by increasing market penetration through a broader product offering, expanding geographic reach, and creating greater scale," said Mr. Fraser.
In 2005, FNF had consolidated revenues and pretax operating income of about $10 billion and $1.6 billion, respectively. FIS pro forma revenues and EBITDA are expected to be about $4 billion and $1 billion, respectively. As of Sept. 30, 2005, FNF's consolidated debt-to-total-capital ratio and GAAP interest coverage were about 46% and 11x, respectively. FNF's pro forma consolidated debt-to-capital is expected to be less than 40%, while interest coverage is expected to remain extremely strong and at more than 12x.
The outlook on FNF is based on the financial strength of FNF's title operations coupled with Standard & Poor's expectation that the ratings on FIS could be raised to investment grade, as the company realizes cost synergies, successfully integrates operations, and reduces debt levels from its good free cash flow generation. Should FNF successfully manage the organizations' increased complexity while maintaining Fidelity Title's industry-leading market share and operating margins, Standard & Poor's would change the outlook to positive, however any deleterious effect on Fidelity Title's competitive position would lead to a revision in outlook or downgrade.
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.
Standard & Poor's Ratings Services