Fitch puts LandAmerica on negative watch

Fitch Ratings said it placed the ratings of LandAmerica Financial Group and its insurance subsidiaries on Rating Watch negative following LandAmerica's announcement that it plans to acquire Capital Title Group Inc.

The Negative Rating watch reflects Fitch's ongoing concerns about LandAmerica's ability to profitably execute its acquisition strategy. The agency said it is concerned about the size of the purchase price premium relative to reported book value given that the acquisition is being consummated at the peak of the real estate cycle and that this transaction would significantly increase intangibles.

Fitch also notes the negative ramifications the acquisition may have on the organization's already weakening balance sheet fundamentals. The $251 million purchase price is expected to be funded 80% cash and 20% common equity, and the cash is expected to be obtained 50% from internal cash sources and 50% from debt. Pro forma adjusted debt to capital would increase to 22.5% from 17.6%.

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