CHICAGO--()--Fitch Ratings has assigned a 'BB' rating to CNO Financial Group, Inc.'s (CNO Financial) recently priced $275 million senior secured note.
The newly rated debt is part of the holding company recapitalization plan that CNO Financial announced on Sept. 4, 2012. Fitch notes the size of the anticipated debt in the recapitalization plan has increased since the original plan was announced based on market acceptance for the debt. Fitch estimates the financial leverage ratio under the new plan will increase to 22% on a pro forma basis from 16.7% at June 30, 2012.
Fitch expects to rate the term loan bank facility proposed in the recapitalization plan once final terms and conditions have been negotiated. Covenants are expected to be similar to those in the current bank facility. Based on currently proposed terms, Fitch expects the ratings on the new facilities to be same as the existing bank facility.
Key rating triggers that could lead to an upgrade include:
--Continued generation of stable earnings free of significant special charges;
--Expansion of cushion versus existing covenant requirements or refinancing of the senior secured notes to create a debt profile consistent with peer life insurance companies;
--Maintaining increased GAAP interest coverage ratio and NAIC RBC above 6x and 350%, respectively.
Key rating triggers that could lead to a downgrade include:
--Combined NAIC RBC ratio less than 300% and operating leverage above 20x;
--Deterioration in operating results;
--Significant increase in credit-related impairments in 2012;
--Financial leverage above 30% and TFC above 0.65x.
Fitch has assigned the following ratings:
CNO Financial Group, Inc.
--$275 million senior secured note 6.375% due Oct. 1, 2020 'BB'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Sept. 22, 2011).