Fitch takes Metris off watch

Fitch Ratings said it has affirmed the CCC rating of Metris Cos. Inc. and removed it from Rating Watch negative where it was placed on Nov. 19, 2003.

The watch had been initiated following the company's external auditor's issuance of a material weakness letter involving internal controls relating to the company's policies and procedures for valuing its retained interests.

Concurrent with this action, Fitch said it has affirmed the B long-term and B short-term rating of Direct Merchants Credit Card Bank NA. The outlook for Metris and Direct Merchants is now stable.

Fitch said the affirmation reflects Metris' resolution of the internal control issues surfaced by its external auditors, which has resulted in the company restating its financial results back to 1998. The cumulative net result of the restatement was an $11 million write-up of the retained interest and a $26 million reduction in equity, although the impact for each period restated varies.

While the company has resolved issues raised by its external auditor, Fitch is concerned with the fact that Metris remains the subject of an SEC investigation related to certain accounting practices, including the retained interest valuation.

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