How concerned is Standard & Poors about the two recent defaults among CFCs top-10 borrowers?
Standard & Poor’s has some concern about the level of reserves and the recovery prospects for the loans to Vartec Telecom Inc. and to Innovative Communication Corp. (ICC). As of Aug. 31, 2004, CFC had a loan-loss allowance that totaled $574 million, representing 2.8% of total loans outstanding. About $249 million is to cover impaired loans and $325 million is for high-risk loans and the general loan portfolio. CFC had impaired loans totaling $936 million, including $612 million for Denton County Electric Cooperative Inc. (CoServ) and $324 million for VarTec. Although the Aug. 31, 2004 figures for high-risk loans are not publicly available, as of May 31, 2004, CFC had reserved $109 million against the $607 million of exposure classified as high risk.
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