Fitch Downgrades Fremont General Corp IDR to 'CC'; Rtg Outlook Revised to Negative

Business Wire, Nov 2, 2007

NEW YORK -- Fitch Ratings has downgraded and affirmed the following ratings of Fremont General Corporation (FMT) and its subsidiaries and revised the Rating Outlook to Negative from Evolving:

Fitch has downgraded the following ratings:

Fremont General Corp:

--Long-term Issuer Default Rating (IDR) to 'CC' from 'CCC';

--Long-term senior debt to 'C/RR6' from 'CC/RR5';

Fremont Investment & Loan

--Long-term deposits to 'CCC/RR4' from 'B-/RR2';

--Long-term IDR to 'CC' from 'CCC';

Fitch has affirmed the following ratings:

Fremont General Corp:

--Short-term IDR at 'C';

--Individual Rating at 'E'

--Support Rating at '5';

--Support Floor at 'NF'.

Fremont Investment & Loan:

--Short-term Deposits at 'C';

--Short-term IDR at 'C';

--Individual at 'E';

--Support Rating at '5';

--Support Floor at 'NF'.

The following rating remains unchanged:

Fremont General Financing I

--Preferred securities at 'C/RR6'.

The downgrade follows the company's announcement that it was unable to reach an agreement with the Gerald J. Ford group with respect to its investment in FMT and that discussions have terminated. The potential Ford investment would have provided some additional equity capital and a seasoned management team to endure challenges presented by the FDIC's cease and desist order. The rating action reflects the absence of a potential buyer, particularly during the stressed market conditions, and the difficulties others similar to FMT are facing. Fitch believes, that under the circumstances, the likelihood of a default on FMT debt has increased. This latest development represents a key setback and eliminates the one variable that would have resolved Fitch's Evolving Rating Watch through an upgrade.

The Revised Outlook to Negative reflects Fitch's ongoing concern that the company's ability to enter into or complete any of its strategic transactions has been compromised and will remain a major challenge.

The Recovery Rating (RR) of FIL's deposits and FMT's outstanding debt have also been downgraded due to the recent severe market decline in pricing for real estate related assets, particularly subprime. Fitch notes that the recovery analysis is based on limited financial information that is available publicly. Fitch downgraded the Recovery Rating to 'RR4' from 'RR2' for FIL's long-term deposits reflecting a recovery 31% - 50% and average recovery prospects given a default scenario. Fitch also downgraded Recovery Ratings to 'RR6' from 'RR5' for FMT's senior debt. 'RR6' Recovery Ratings reflect poor recovery or 0% - 10%. The Recovery Ratings for the preferred stock (issued through Fremont General Financing I) were maintained at 'RR6'.

FMT has elected to defer dividend payment on its trust preferred securities issued by Fremont General Financing. While not a bank holding company, FMT is a holding company that engages in lending through FIL, which is an industrial bank regulated by the FDIC and the Department of Financial Institutions of the State of California.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.