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Fitch Ratings has published an updated report on its approach to evaluating the credit implications for an issuer's operating leases. In order to compare the financial condition of companies that fund assets with different mixes of debt, capital leases and operating leases, it is Fitch's procedure to adjust the financial ratios of corporate lessees (e.g., nonfinancial corporations, such as retailers, manufacturers, telecommunication companies and utilities) to capitalize operating lease liabilities as debt-like obligations. The methods used to capitalize lessees' operating lease obligations in going concerns are applying a multiple times the rental expense in the most recent year and calculating the present value of future rental payments. When financial ratios adjusted for operating leases are presented in Fitch reports, the basis for valuing the lease obligations is explained. Some executory contracts that are like operating leases may be evaluated by Fitch in a like manner. The approach described in Fitch's report is generally not applied to banks, finance companies or lessors. The full report 'Operating Leases: Updated Implications for Lessees' Credit' can be found on the Fitch Ratings' web site at www.fitchratings.com. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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