A.M. Best Assigns Debt Ratings to Fairfax Financial Holding Limited’s Senior Notes Issue and Preferred Share Offerings
February 20 2015 - 4:37PM
Business Wire
A.M. Best has assigned a senior debt rating of “bbb” to
Fairfax Financial Holdings Limited’s (Fairfax) [TSX: FFH and
FFH.U] (Toronto, Canada) forthcoming CAD 300 million senior
unsecured notes. Concurrently, A.M. Best has assigned a debt rating
of “bb+” to CAD 200 million cumulative five-year rate reset
preferred shares (Series M) of Fairfax. The outlook for all ratings
is stable. Fairfax's issuer credit rating of “bbb,” existing debt
ratings and ratings of its insurance operating entities are all
unchanged.
Fairfax intends to use the proceeds of the Notes Offering,
Preferred Share Offering and its recently announced Subordinated
Voting Share Offering to partially fund the previously announced
proposed acquisition of Brit PLC. Fairfax’s financial leverage
position and the group’s risk-adjusted capital position are
expected to deteriorate moderately but remain in line with A.M.
Best’s expectations for the current ratings. The transaction adds a
significant amount of intangible capital to the group’s balance
sheet and moves their debt to tangible capital to the high end of
the acceptable range.
The Series M preferred shares have a quarterly dividend rate of
4.75% for the initial five years. Thereafter, the rate will be
reset every five years and will be equal to the then current
five-year Government of Canada bond rate, plus 3.98%. Beginning
March 31, 2020, and thereafter on every fifth March 31, holders of
the Series M preferred shares will have the option to convert their
shares to Series N preferred shares, on a one-for-one basis, which
will be cumulative, floating rate preferred shares, with the
interest rate reset quarterly to the then current three month
Government of Canada Treasury Bill yield, plus 3.98%.
Additionally, A.M. Best has assigned indicative debt ratings of
“bbb” senior unsecured, “bbb-” subordinated and “bb+” preferred
stock to Fairfax's CAD 2 billion universal shelf. The new notes
will be a drawdown under this shelf. The outlook for all ratings is
stable. Concurrently, A.M. Best has withdrawn the debt ratings on
the previous shelf registration, which has expired.
Finally, A.M. Best has assigned a debt rating of “bb+” to the
recently issued CAD 99,590,400 Preferred Shares Series D. The
outlook is stable. The Preferred Shares Series D (“Series D
Shares”) are related to the Preferred Shares Series C - CAD 250
million cumulative five-year rate reset shares issued by Fairfax in
October 2009 (“Series C Shares”), which are convertible at the
option of the holders of Series C Shares beginning Dec. 31, 2014,
and on Dec. 31 every five years thereafter, into Series D Shares on
a one-for-one basis (subject to applicable restrictions on
conversion). Holders of Series D Shares will be entitled to receive
quarterly floating rate cumulative preferential cash dividends.
Holders of Series D Shares will have the right, at their option, to
convert such shares into Series C Shares, on a one-for-one basis,
beginning on Dec. 31, 2019, and on December 31 every five years
thereafter (subject to applicable restrictions on conversion).
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
• Catastrophe Analysis in A.M. Best Ratings
• Equity Credit for Hybrid Securities
• Insurance Holding Company and Debt Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance
Companies
• Understanding Universal BCAR
This press release relates to rating(s) that have been
published on A.M. Best's website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestDarian Ryan, CPA, 908) 439-2200, ext.
5449Senior Financial Analystdarian.ryan@ambest.comorChristopher
Sharkey, 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorMichael
Lagomarsino, CFA, 908) 439-2200, ext. 5810Assistant Vice
Presidentmichael.lagomarsino@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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