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CU System
Fitch affirms corporate rating after merger announced
CHICAGO (1/11/11)--Mid-Atlantic Corporate FCU's rating has been affirmed by Fitch Ratings. The affirmation followed announcement of the corporate's plans to pursue a merger with VACORP FCU. Fitch said it affirmed the "A+" long-term Issuer Default Rating (IDR) and the "F1+" short-term IDR. The rating outlook is stable. Mid-Atlantic and VACORP entered into an agreement in principal to pursue a merger. Mid-Atlantic, which will be the surviving charter, has begun its due diligence process, said Fitch's press release. The merger is subject to approval by the National Credit Union Administration and VACORP's members. If approved, the merger is expected to be completed in fourth quarter. "The transaction should provide the combined company with some cost-saving opportunities, but more importantly, by the time the merger is completed, Mid-Atlantic will likely have completed its current capital-raising initiatives and capital ratios for the combined company are expected to be in compliance with the new regulatory standards," Fitch said. Fitch said its affirmation reflects that Mid-Atlantic's IDR is currently at its Support rating floor. The Individual rating, which reflects the corporate's stand-alone financial position absent external support, remains an "E." An "E" rating denotes a company that requires or will require external support. Although Mid-Atlantic has never fallen below its mandatory regulatory capital requirements, Fitch said, it "still faces significant capital challenges and continues to benefit from the government support provided to the industry to stabilize the corporate credit union system." However, as Mid-Atlantic executes on its current capital-raising initiatives while maintaining its otherwise sound fundamentals, the companies Individual rating would likely be upgraded, Fitch said. The $3.1 billion asset Mid-Atlantic is based in Middletown, Pa., and the $1.2 billion corporate credit union is based in Lynchburg, Va. On a pro-forma basis the total assets of the combined company will be more than $4.3 billion, with a membership base of about 860 member institutions. For the full ratings report, use the link.
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