S&P Eyeing Conti's Debt Rating

ContiFinancial Corp.'s BB-plus senior debt rating has been placed on CreditWatch with negative implications by Standard & Poor's.S&P said the action stems from an announcement by ContiFinancial that it would take a special charge in its first fiscal quarter, ended June 30, to write down the value of its excess spread receivable and to meet its obligation under a yield maintenance agreement with investors in company interest-only securities sold from late 1995 through early 1996. "While the company will report a profit for the quarter, the writedown highlights the company's dependence on the subprime home equity market and the use of gain-on-sale accounting for reported earnings," S&P said. In addition, S&P said that ContiFinancial's reliance on brokers and other third parties to acquire its product "leaves it especially vulnerable both to refinancing risk and to the heated competitive environment that currently exists in the subprime mortgage sector." S&P's website address is http://www.ratings.standardpoor.com.