Fitch Aff Cendant Rtg; Outlk To Neg After NRT Acquisition

Business Wire, April 19, 2002

Business Editors

NEW YORK--(BUSINESS WIRE)--April 19, 2002

Fitch Ratings has affirmed a 'BBB ' rating for Cendant Corporation's (Cendant) senior unsecured debt, a 'BBB' rating for its subordinated debt and an 'F2' rating for its commercial paper following the company's announcement that it will acquire NRT, Inc. ("NRT"). Fitch Ratings has also affirmed PHH Corporation's, ("PHH"), a wholly owned subsidiary of Cendant, senior debt rating of 'BBB ' and commercial paper of 'F2'. Fitch has changed the Rating Outlook for both Cendant and PHH to Negative.

Cendant's ratings consider the diversity and stability of its core businesses, the company's leading position in most of its business lines, the resolution of the shareholder class action settlement and the maintenance of adequate liquidity to fund major near term obligations. Fitch Ratings expects profitability to improve as acquisitions completed in 2001 are integrated and Avis and other travel-related businesses recover from the recession and events of September 11.

Cendant has sufficient liquidity to fund the remaining $1.19 billion of its $2.85 billion class action settlement due by July 2002, pay another $1 billion on May 4, 2002, if required, to satisfy a put option on its zero coupon convertible debentures and finance the cash portion of the NRT and Arvida acquisitions with its own cash. The company's committed bank facilities are more than adequate to cover both the settlement liability and the potential put option. In addition, Cendant had $1.8 billion in cash on its balance sheet at year-end 2001.

On April 17, 2002, Cendant announced that it has exercised its option to acquire 100% of the common stock of NRT Inc. from Apollo Management, LP and members of NRT management. The purchase price was approximately $230 million in stock plus the assumption of about $300 million in debt, which will be retired. At the same time, NRT has acquired Arvida Realty for approximately $160 million, with closing scheduled to be simultaneous with the NRT acquisition.

Fitch Ratings has changed the Rating Outlook to Negative reflecting Cendant's recent aggressive acquisition activity and additional leverage, as adjusted for rents, that the NRT and Arvida transactions have added. The change in Outlook also reflects some loss of financial flexibility as cash balances are reduced. A partial offset to these concerns, which may occur in the near term, would be the sale of National Car Parks with proceeds used to reduce debt. An additional concern relates to continuing acquisition activity that could strain management's ability to integrate many businesses with existing operations and systems.

NRT was created in 1997 as part of a joint venture agreement between Cendant and Apollo. NRT holds the operating assets of Coldwell Banker and ERA and Cendant owns the trademarks for which it collects royalty and fee income. NRT generated approximately $3 billion in gross commission income and $55 million in EBITDA in 2001, a difficult year for NRT due to NRT's large concentration of brokerages in California. Arvida is the largest residential real estate brokerage in Florida and will add to NRT's existing Florida operations.