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DCR Upgrades Chrysler Financial Corp.'s Senior Notes to 'A'

2 July 1997

DCR Upgrades Chrysler Financial Corp.'s Senior Notes to 'A'

    CHICAGO, July 2 -- Duff & Phelps Credit Rating Co. (DCR) has
upgraded Chrysler Financial Corp.'s (CFC) senior notes to 'A' (Single-A)
from 'A-' (Single-A-Minus).  In addition, DCR reaffirms the 'D-1' (D-One)
commercial paper rating.  This rating action affects $12.7 billion debt
outstanding at March 31, 1997, including $3 billion commercial paper.
    DCR's upgrade is due mainly to increased confidence in Chrysler's ability
to maintain its competitiveness, even in a potential economic recession, and
expectations that CFC's asset quality measures will remain comparatively solid
despite cyclical pressures.  CFC's ratings continue to reflect its close
marketing and financial ties to parent Chrysler Corp. (senior debt also
upgraded to 'A'), the typical high quality and liquidity of its receivables
and strong profitability track record.
    Management has invested in systems technology and credit scoring
applications, which will allow CFC to confront the rapidly changing
competitive environment in domestic markets.  CFC's gradual overseas expansion
to support retail and wholesale sales of Chrysler products represents an
opportunity.  Underwriting standards must be adjusted to reflect unique local
market conditions.  However, DCR acknowledges that asset quality measures in
markets targeted for expansion, namely Europe, perform better than those
domestically.  As is the case in the United States, CFC must price according
to the borrower credit quality to generate appropriate risk-adjusted returns.
    Since late 1995, retail asset quality measures have eased somewhat from
the strong industrywide performance in recent years due to increased used car
financings, which tend to attract a lower-tier credit quality borrower, weaker
industrywide credit conditions and the temporary adverse effect caused by the
consolidation of portfolio servicing operations.  Importantly, financing to
lower-tier borrowers typically generates a higher portfolio yield to
compensate for the higher credit loss rate.
    Beginning in March 1997, CFC assumed the residual valuation risk on retail
operating leased vehicles originated in certain geographic areas that are
expected to amount to 25 percent of total leased vehicle originations.  The
residual risk on the remaining originations will continue to be assumed by a
third party.
    Managed leverage (balance sheet and securitized assets/equity) is expected
to remain stable.  Balance sheet leverage will likely increase over time
reflecting the greater use of on-balance sheet funding and the continuation of
dividend payments to Chrysler.

SOURCE  Duff & Phelps Credit Rating Co.