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Fitch Puts LandAmerica on Ratings Watch

LandAmerica Financial Group here has been placed on Rating Watch Negative by Fitch Ratings, Chicago, because of its agreement to acquire Capital Title Group Inc., Scottsdale, Ariz.

The placement, Fitch said, is because of its ongoing concerns regarding LandAmerica's ability "to profitably execute its acquisition strategy."

It said it is worried about the size of the purchase price premium relative to reported book value, especially because the deal is being done "at the peak of the real estate cycle."

Another concern is that the purchase will further weaken LandAmerica's balance sheet. The transaction, valued at $251 million, will be paid out 80% in cash, with half that cash component coming from internal sources and the rest new debt.

The pro forma adjusted debt to capital ratio increases from 17.6% to 22.5% post-deal, while the fixed charge coverage ratio decreases from 7.8 times from 8.6 times and the intangible equity to capital ratio increases to 45%.

If LandAmerica is downgraded, Fitch said it believes the ratings will not be cut more than one notch at the close of the acquisition.

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