PROSPECT HEIGHTS, Ill. - Dominion Resources Inc. and Household International Inc. said their commercial financial services subsidiaries have signed a letter of intent to create a national commercial lending company.

Financed with $75 million from each company and a $600 million asset base from Household's liquidating commercial loan portfolio, the yet-unnamed venture will specialize in lending to middle-market companies.

The operation, to be headquartered in the Chicago area and managed on a day-to-day basis by 45 Household employees, will provide financing for buyouts, expansions, refinancings, and recapitalizations. The new company will also provide senior and subordinated debt to public and private businesses.

The new unit will not make commercial real estate loans, according to Robert Hartney, a Household spokesman.

Household, which has $1.3 billion in its commercial portfolio slated for liquidation, says it win stay in the middle-market lending business, but only to provide high-quality, senior secured debt. according to David P. Killion, president of the corporate finance division of Household Commercial Financial Services.

Household win not compete with the new unit in any of its defined businesses, Mr. Killion said, and the new venture will have the right of first refusal on loans that interest both.

Analysts called the move a plus for Household, because it would help the $31 billion asset-finance company offload receivables that have been burdening its balance sheet.

"They've been lugging, their liquidating, portfolio on the books since 1990," said Fred Meinke of Kemper Securities. "That's the sort of thin, the ratings agencies watch real closely. This deal will take some of that away, streamline the company, and keep it focused on the credit card, consumer loan, and insurance business."

Mr. Killion said the new venture may securitize its loans in order to provide financing, but no decision has been made.

The new unit will operate as an unconsolidated business of both Dominion and Household. The deal is expected to close before Dec. 31.

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