ACE INA Holdings Inc., a subsidiary of ACE Limited ACE is offering 3.15% $800 million senior notes due Mar 2025.
The company intends to deploy the net proceeds in repaying $500 million 5.70% senior notes due Feb 2017 and $300 million 5.80% notes due Mar 2018 at maturity. Remaining proceeds, if any, will be made available to subsidiaries or investments in marketable securities.
The notes will be unconditionally guaranteed by ACE Limited.
Subsequently, credit rating agencies have assigned ratings to the senior notes. While A.M. Best has assigned a debt rating of “a+” with a stable outlook, Moody's Investors Service, a wing of Moody’s Corporation MCO assigned an A3 rating also with a stable outlook.
It seems a prudent and common approach to procure funds from the market by issuing notes, capitalizing on the still low interest rate environment. By issuing notes at lower coupon rates the company is lowering the interest burden and thereby facilitating margin expansion. In addition, the company is also ensuring sufficient liquidity. Recently, AFLAC Inc. AFL issued $1 billion senior notes while Marsh & McLennan Companies MMC issued senior unsecured notes worth $500 million.
Though the new issuance will increase the debt level and in turn the leverage ratio, it will still be within A.M. Best's guidelines for the assigned rating.
Moody’s noted that the ratings of the Zacks Rank #3 (Hold) property and casualty insurer accounts for a competitive position, a diversified international spread of risk and healthy internal liquidity, besides strong capitalization and financial flexibility.
Favorable ratings from credit rating agencies play an important role in retaining investors’ confidence in the stock and maintaining credit worthiness in the market, helping it to raise money easily. We believe that the company’s strong score with the credit rating agencies will help it to write more business going forward.
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