A.M. Best Assigns Debt Rating to Prudential Financial, Inc.'s New Junior Subordinated Notes
OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has assigned a debt rating of "bbb" to the recently issued $650 million 5.70% fixed rate junior subordinated notes maturing March 15, 2053 of Prudential Financial, Inc. (PFI) (Newark, NJ) [NYSE: PRU]. In addition, A.M. Best notes that the issuance has an additional $97.5 million over-allotment option. The assigned outlook is stable. The financial strength, issuer credit and existing debt ratings of PFI and its domestic life/health insurance companies are unchanged.
The assigned rating reflects the notes' deeply subordinated status within PFI's capital structure. Specifically, these securities will rank junior to PFI's existing and future senior indebtedness and pari passu with PFI's existing junior subordinated notes.
A.M. Best notes that the newly issued junior subordinated notes contain terms similar to the company's previous junior subordinated issuances in 2012. (See A.M. Best's press release dated November 28, 2012 for further information.) Similarly, these notes will allow PFI to redeem the new notes on or after March 15, 2018 or at any time within 90 days after the occurrence of a "tax event," "a rating agency event" or a "regulatory capital event." The net proceeds of the hybrid offering are expected to be used primarily for general corporate purposes including the redemption of callable debt in June 2013.
The rating recognizes PFI's very strong liquidity profile, as well as the strong operating performance of its various business segments. PFI has repeatedly demonstrated its access to the capital markets, particularly over the past two years. However, A.M. Best notes that PFI, although consistent with its scale and business mix, continues to utilize significant amounts of total leverage on a consolidated basis. Nevertheless, when incorporating partial equity credit for the new notes, financial leverage remains within A.M. Best's guidelines for the company's current rating level. Although interest expense coverage is currently below A.M. Best's guidelines given the company's reported GAAP results for year-end 2012, Prudential currently maintains sufficient liquidity throughout the organization to enable it to meet its obligations, and A.M. Best anticipates higher earnings and coverage ratios going forward.
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.
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