Fidelity Revises Financing Of Partial Spin-Off for Title

To address concerns raised by the rating agencies, Fidelity National Financial has made some changes to the conditions previously announced for its partial spin-off of its title insurance business.

The original plans called for Fidelity National Title Group Inc. to borrow $500 million under a new bank credit facility to pay a dividend to FNF. Additionally, FNT was to issue a $250 million intercompany note payable to FNF with terms that were to mirror FNF's existing $250 million 7.30% public debentures due in Aug. 2011.

After holding discussions with the rating agencies, some changes have been made to reduce concerns that would have impacted the financial strength and senior debt ratings of FNT and FNF.

The amount of the dividend that will be paid by FNT to FNF prior to the spin-off is now $295 million. The money for the dividend will come from a couple of sources.

First, FNT will borrow $150 million against a new $200 million-$300 million credit facility. The remaining $145 million will be paid as ordinary and extraordinary dividends by an insurance subsidiary of FNT.

In addition, FNT will issue two intercompany notes of $250 million payable to FNF, with terms that mirror the existing FNF $250 million 7.30% public debentures due in August 2011 and the $250 million 5.25% public debentures due in March 2013.

Alternatively, FNT may make an exchange offer that would trade the outstanding FNF notes for notes that FNT would issue that would have substantially the same terms.

The changes were publicized as FNT filed an S-1 registration statement for the spin-off. What remains unchanged is that FNF is going to retain 82.5% of the stock of FNT after the spin-off.

FNF will take Class B common shares, which have 10 votes per share, as compared to the Class A common shares being distributed to existing FNF shareholders with just one vote per share. The distribution ratio is 0.175 shares of FNT for each share of FNF held.

"The filing of the registration statement is an important milestone in our announced plan to make FNT a publicly traded company," said FNF chairman and chief executive William P. Foley II in a statement issued by the company. "With the filing of this registration statement, we have somewhat altered the expected capital structure at FNT and the planned dividend that FNT will pay to FNF in order to best maintain an 'A' financial strength rating and an investment grade senior debt rating at FNT. We believe these actions demonstrate our commitment to maintaining the 'A' financial strength rating and an investment grade senior debt rating at FNT. We look forward to completing the distribution of FNT stock to FNF stockholders in the third quarter of this year."

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