OLDWICK, N.J. -- (Business Wire)
A.M. Best Co. has assigned a debt rating of “bbb” to the recently
issued $500 million 5.20% fixed-to-floating rate junior subordinated
notes due 2044 of Prudential Financial, Inc. (PFI) (Newark, NJ)
(NYSE: PRU). The assigned outlook is stable. The debt is a drawdown off
of an existing shelf registration filed in March 2012. 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 its existing junior subordinated notes.
A.M. Best notes that the newly issued hybrids contain terms similar to
the company’s previous junior subordinated issuances. Similarly, PFI may
redeem the notes on or after March 15, 2024 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 PFI’s 9% junior subordinated notes due in 2068.
The rating recognizes PFI’s very strong liquidity profile, as well as
the strong operating performance of its various business segments. The
company has repeatedly demonstrated its access to the capital markets
and in the past month (inclusive of this offering) has issued $1.2
billion of junior subordinated notes. However, A.M. Best believes 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, PFI’s financial leverage remains within A.M. Best’s guidelines
for the company’s current ratings.
Although interest coverage is currently below A.M. Best’s guidelines
given the company’s reported GAAP results for year-end 2012, PFI
currently maintains sufficient liquidity throughout the organization to
meet its obligations. A.M. Best anticipates higher earnings and coverage
ratios going forward. In addition, the recent issuances have improved
the company’s debt maturity profile and will eventually lower overall
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.
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 © 2013 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.
Ken Johnson, CFA
Senior Financial Analyst
908-439-2200, ext. 5056
Assistant Vice President
Senior Manager, Public Relations
Assistant Vice President, Public Relations
Source: A.M. Best Co.
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