Duff & Phelps Credit Rating Co. has upgraded the debt of Aames Financial Corp., citing the consumer finance company's "solid" asset quality.

The rating agency upgraded $23 million of senior secured notes due in 2002 to BB-plus, from BB-minus. In addition, Duff & Phelps assigned an initial rating of BB to Aames' $115 million of convertible subordinated debentures.

Like other subprime lenders, which specialize in loans to people with less than perfect credit records, Aames experiences high levels of delinquency - 12%-15%.

Duff said, however, that none of Aames' secured pools of assets has suffered more than a 3% cumulative loss rate, thanks in part to a policy of making relatively low loan-to-value loans.

In addition, the rating agency said Aames' record of high growth and profitability had enabled it to attract experienced managers.

Duff said Aames' investment in appraisal technology had also helped limit losses.

Aames completed an equity offering in June 1995, which generated proceeds of more than $40 million, substantially strengthening the equity base, Duff added.

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