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DCR Rates Associates Corporation of North America's $800 Million Two-Part Note Offering 'AA-'

6 January 1998

DCR Rates Associates Corporation of North America's $800 Million Two-Part Note Offering 'AA-'

    CHICAGO, Jan. 6 -- Duff & Phelps Credit Rating Co. (DCR) has
assigned 'AA-' (Double-A-Minus) rating to Associates Corporation of North
America's (Associates) $800 million, two-part note offering.  The $500 million
5.85 percent notes are priced at par and mature January 15, 2001.  The
$300 million 6.10 percent notes are priced at par and mature January
15, 2005.
    Ford Motor Company has an approximate indirect 80 percent ownership
interest in parent company, Associates First Capital Corp. (AFCC).  Ford has
announced that they will spin off the remaining 80 percent ownership interest
in AFCC.  No support agreement exists between Ford and AFCC or Associates.
From a ratings standpoint, DCR has always viewed AFCC and Associates as
independent entities.
    DCR's ratings also reflect Associates' strong record of profitability,
established consumer and commercial finance franchises, high-quality
receivables portfolio and an experienced management team.  Associates
maintains a highly diversified portfolio of receivables, with lower-risk,
residential real estate-secured loans representing 36 percent of the total.
Associates' strong matched funding discipline mitigates the impact of a
changing interest rate environment on earnings.
    Earnings have been driven by portfolio growth, with acquisitions
occasionally supplementing internal growth.  Historically, Associates has
demonstrated its ability to acquire portfolios in existing product lines,
successfully manage credit quuality and generate profits.  Acquisitions have
again become an important part of Associates' growth strategy as internal
growth has slowed.  These acquisitions are complementary to Associates'
existing business lines and will help build even larger-scale operations.
    Portfolio expansion is focused on greater market penetration through
Associates' existing consumer and commercial branch network and the
acquisitions.  Loan spreads are expected to remain under pressure due to
competitive pricing pressures.  Positively, Associates continues to make
progress in reducing and controlling operating expenses as a percentage of
revenues.  Operating expense efficiency is important to the profitability of
the consumer lending activities due to the relatively higher-cost distribution
channel.  DCR expects asset quality will remain under pressure, especially in
the unsecured consumer portfolios.  Management has built reserves to
3.5 percent of receivables.  Leverage is traditionally maintained less than
7.25:1 through Associates' dividend policy.

SOURCE  Duff & Phelps Credit Rating Co.