FINANCE UNITS GAIN FROM PARENT COMPANY, SAYS S/P
Standard and Poor's said that currently
17 finance units benefit from parent relationships by receiving
higher ratings than their financial performance alone would
merit.
    By drawing on its parent company's strength, a weaker
finance subsidiary can achieve a credit rating as high as its
parent.  An independent finance company on the other hand must
operate within more stringent guidelines than a unit and is at
a competitive disadvantage, S and P said. 
    The agency rates a finance unit on its creditworthiness  as
well as the support agreement it has with its parent.
    Standard and Poor's said that some finance subsidiaries
have formal support agreements with the parent company which
obligate the parent to maintain the unit's net worth.  The
agreement assures that the unit meets its obligations on time
and requires it to operate within specific guidelines.
    Others have less formal agreements with the parent like
General Electric Credit Corp <GE> whose AAA rating reflects its
parent's, General Electric Co.  But GE injected sizeable equity
into the unit at timely intervals, S and P noted.
    These agreements are being tested as finance firms expand,
and S and P said it will review a unit that violates the pact.
 Reuter
