Fitch Ratings said today that it has further downgraded troubled Fremont General's debt ratings, after already once downgrading the company's debt on March 1. Fitch's actions included downgrading Fremont's Long-Term Issuer Default Rating (IDR) to 'CCC' from 'B+'; Short-Term Issuer to 'C' from 'B'; Long-Term senior debt to 'CC' from 'B'; and Individual to 'E' from 'D'. Fitch said its rating actions reflect Fremont's recent regulatory filing disclosing that its primary operating subsidiaries will enter into a formal cease and desist order (C&D) with the Federal Deposit Insurance Corporation. The order criticized a number of Fremont's practices, including violations of Section 23B pertaining to transactions between affiliates, as reported by Housing Wire last week. In discussing potential hurdles for the troubled lender, Fitch said it believes that Fremont's financial flexibility will weaken further and that the prospects for receiving a reasonable value for the subprime business are low. The stance by the rating agency contrasts with the view put forth last week by Fremont president Louis Rampano, who had said he expected the company to make an "orderly and disciplined" exit from the subprime business. Beyond the downgrades, Fitch indicated that Fremont will remain on Negative Rating Watch as well, noting that pending regulatory action will significantly weaken the liquidity profile at Fremont. Recent vintages of Fremont MBS have underperformed, Fitch warned, and as a consequence, the rating agency said that cash flows from associated residuals held by the company may decline. At Sept. 30, 2006, Fremont had available cash on hand and some contingent funding to offset any potential cash shortfalls from the residuals; however, Fitch noted that Fremont can no longer rely on cash dividends from its investment and loan activities, and said that the valuation of the company's net interest margin bonds may change, as the company's valuation methodology has also been criticized by the FDIC. Hinting at a potentially ominous outcome, Fitch said it expects that Fremont will have difficulty executing its business plan under the restrictions imposed by the C&D. While not a bank holding company, Fremont General is a holding company that engages in lending through its Fremont Investment & Loan subsidiary, which is an industrial bank regulated by the FDIC and the Department of Financial Institutions of the State of California. For more information, visit http://www.fitchratings.com.