Fitch Places Ugly Duckling Corp. On Rating Watch Negative

    NEW YORK--Jan. 22, 2001--Fitch places Ugly Duckling Corp.'s (Ugly Duckling) `B-' subordinated debentures on Rating Watch Negative, following the company's announcement that General Electric Capital Corp. (GECC) will not renew Ugly Duckling's warehouse facility when it comes due in June 2001. Approximately $36 million of subordinated debt is affected by this rating action. Rating Watch Negative indicates that the current rating may be either maintained or lowered upon review.
    GECC informed Ugly Duckling that it will not renew its warehouse facility when it comes due in June 2001 as GECC has decided to exit the auto finance business, although Ugly Duckling may continue to utilize the facility until it expires. However, under their recently completed bond-insured securitization, Ugly Duckling must have a new warehouse provider in place by April 1, 2001, or trigger an event of default under the terms of the securitization. Ugly Duckling is currently negotiating to replace GECC, although such negotiations can not be certain and failure to replace GECC by April 1, 2001 will likely have implications for the company's near-term cash flow. Fitch will continue to monitor the situation and evaluate any new agreement should the company successfully renegotiate with a new warehouse provider.
    Ugly Duckling Corp., based in Phoenix, AZ, is the largest operator of `buy here/pay here' used car dealerships, with over 77 owned dealerships and $525 million in managed loans outstanding at Sept. 30, 2000.