Duff Upgrades Debt at Chemical and Its Units

Placing faith in Chemical Banking Corp.'s planned expense reductions, Duff & Phelps Credit Rating Co. on Tuesday upgraded debt ratings on the New York money-center and its subsidiaries.

The ratings changes affect roughly $12 billion of debt.

The $171 billion-asset banking company took a pre-tax restructuring charge of $260 million in the fourth quarter, and said it is aiming to reduce its ratio of operating expenses to operating revenues to 57% from a current 63% over two years.

Chemical's stock has risen by roughly 6.7% since the Dec. 1 announcement of the cost-cutting campaign. And Duff & Phelps analyst Thomas G. Stone said the debt ratings upgrades reflect his agency's confidence that Chemical "will get the cost savings."

Mr. Stone raised ratings on Chemical Banking Corp. debt, with senior debt rising to A-plus from A; subordinated debt to A from A-minus, and preferred stock to A-minus from BBB-plus. Also raised were ratings at Texas Commerce Bancshares, a subsidiary, and at the lead banks of Chemical and Texas Commerce.

Standard & Poor's Ratings Group, meanwhile, has a rating of A on the holding company's senior unsecured debt, and A1 on the commercial paper.

Some debt and equity analysts think Duff & Phelps' upgrade may be premature. And PaineWebber Inc. analyst Lawrence W. Cohn said the equity market remains concerned with Chemical's revenues.

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