Troubled USF&G gets lower rating on debt by S&P

December 18, 1990|By Peter H. Frank

Because of an editing error, an article in yesterday's Business section about USF&G Corp.'s debt rating by Standard & Poor's Corp. suggested that all of the insurer's debt had been lowered to triple-B from single-A. In fact, only the company's senior debt was lowered to triple-B. USF&G's commercial paper rating was lowered to A-2 from A-1, and its preferred stock rating went to triple-B-minus from single-A-minus.

The Sun regrets the errors.

Citing a deteriorating financial condition and management uncertainties, Standard & Poor's Corp. downgraded the debt rating of Baltimore-based USF&G Corp. to triple-B from single-A yesterday and lowered the rating on the insurer's ability to pay claims.

Although still relatively strong, the lowered ratings reflected in part the uncertainties created by the recent appointment of a new chairman and chief executive, Norman P. Blake Jr., and a previous policy of paying dividends that outstripped the company's earnings, S&P said.

FOR THE RECORD - CORRECTION

Traded on the New York Stock Exchange, USF&G closed down 37.5 cents a share to $7.75 a share yesterday. "The stock is just out there waffling until people develop a sense of Mr. Blake's program and what it will be," said Denis J. Callaghan, an insurance analyst at Alex. Brown Inc. "Clearly the company is in a weakened position and they have to pull it together."

USF&G, which operates primarily through its property and casualty insurance subsidiary, United States Fidelity & Guaranty Co., lost $15 million during the third quarter. The company announced Nov. 7 that it would slash its quarterly dividend by two-thirds and cut its work force in moves aimed at saving about $235 million in annual expenses. S&P put USF&G on its CreditWatch the following day, a step that led to yesterday's downgrade.

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