Duff & Phelps Initiates FirstPlus Ratings

Duff & Phelps Credit Rating Co., Chicago, has initiated debt ratings for FirstPlus Financial Group Inc. with a senior debt rating of BB and a subordinated debt rating of BB-minus.The Dallas-based FirstPlus, the nation's largest originator and servicer of high-LTV loans, recently put itself on the auction block. Duff & Phelps said its ratings reflect the company's "improving cash-oriented earnings," its securitization management, and its "dominant" market share in the high-LTV sector. Offsetting factors include the "still unseasoned performance record" for high-LTV loans, exposure to short-term interest rate volatility, and "a high reliance on securitization, including the continued, though more conservative, use of gain-on-sale accounting and the de facto subordination of cash flows relative to securitization lenders." The rating agency cited favorably FirstPlus's use of "significantly more efficient securitization structures over the past year which provide for an up to 2% upfront cash gain from a combination of initial undercollateralization and the sale of senior interest-only securities." Duff & Phelps's website address is http://www.dcrco.com.