September 25, 2007 13:33 ET

FIMALAC : Press Release

PARIS--(Marketwire - September 25, 2007) - The Board of Directors of Fimalac met on September 25, 2007 under the chairmanship of Marc Ladreit de Lacharrière to examine the financial position and business of Fitch Ratings and review its outlook in the present financial market crisis.

Financial estimates concerning the fiscal year ending September 30, 2007

Fitch Ratings' businesses continued to expand rapidly in July and August. Growth was especially high in international markets, and was evenly distributed across all rating sectors. In the United States as well as internationally, Corporate Finance and Financial Institutions ratings experienced particularly strong growth. The effects of the US subprime crisis were felt only from the beginning of September, and concerned only a limited portion of Fitch Ratings' total revenue.

Excluding Korea Ratings, Fitch Ratings' revenue in US dollars for the year ending September 30, 2007 is expected to increase by a sharp 25% compared with fiscal 2005/2006, to around $820 million. Korea Ratings, of which control was acquired in April 2007, has enjoyed a satisfactory level of business and will contribute to even higher growth in reported revenue.

As a result, based on the available estimates, Fitch Ratings' operating results, expressed in US dollars, will rise sharply in fiscal 2006/2007, maintaining the trend observed in recent years and consistent with revenue growth.

The Fimalac Group, comprising Fitch Ratings, Algorithmics and the parent company, should therefore report solid operating results for the year ending September 30, 2007. These results will be announced on November 27.

The role of Fitch Ratings as a rating agency

Fundamentally, ratings are measurements - determined by applying a rigorous, tried and tested methodology - that reflect the ability of an entity or a securities issue to meet financial commitments in accordance with their terms. They are one of a variety of indicators provided to investors, but under no circumstances do they represent a certification or a recommendation to buy or sell or make an investment.

Fitch Ratings is not involved in structuring issues and does not act as an advisor to the arrangers. It makes every effort to manage the potential conflict of interest arising from the fact that issuers pay fees for ratings services by ensuring the independence, objectivity and integrity of its ratings. Fitch Ratings is actively involved in discussions with regulators and market participants on ways to improve transparency of credit and market risk.

Concerning the US subprime crisis, Fitch Ratings' research teams issued warnings as early as 2005 alerting investors to the risks linked to this specific market.

Subprime ratings represented roughly 6% of Fitch Ratings' total revenue in calendar 2006.

Outlook for fiscal 2007/2008

Fitch Ratings' fundamentals remain extremely solid, and the medium-term target of achieving average revenue growth of around 12% per year has been confirmed.

Nevertheless, meeting this objective will depend on the duration of the financial crisis and the liquidity crisis in the banking system as well as on the economic risks, particularly in the United States.

Issuance of subprime RMBS and Real Estate CDOs is expected to decline, with the result that the volume of Structured Finance ratings by Fitch Ratings in these sectors should continue to be low, while Corporate Finance rating activity should remain at a healthy level.

The present lack of visibility makes it difficult to issue any guidance for fiscal 2007/2008 at this stage and encourages caution.


* *

The members of the Board of Directors of Fimalac have reaffirmed their confidence in the future of the Fitch Ratings business model and have therefore authorized the ongoing implementation of the Fimalac share buyback program. Taking into account the share buybacks realized during the summer, the number of Fimalac shares held in treasury represented 5.38% of the capital at August 31, 2007.

At the same date, Marc Ladreit de Lacharrière held 66.04% of the capital, after increasing his interest in the Company by roughly 0.3% in August.

This information is provided by CompanynewsGroup

Contact Information

  • Contact:
    Jean-Philippe LAVAL
    Groupe FIMALAC
    Tel : 33 (1)
    Fax : 33(1)