A.M. Best has conferred a debt rating of ‘a-’ to the newly issued debt by Prudential Financial Inc.
(PRU - Analyst Report
Prudential had issued the debt in three parts. The first was of $350 million worth of 5.1% 30-year notes, the second of $350 million worth of 2.3% five-year notes and the third of $350 million five-year notes carrying floating rate of interest.
The rating agency has kept other ratings untouched, which includes financial strength, issuer credit and existing debt ratings of Prudential Financial and its subsidiaries. All the ratings carry a stable outlook. A stable outlook reflects that Prudential is experiencing stable financial and market trends, and that therefore a rating change in the near term is unlikely.
The funds from the notes issue will be used for general corporate purpose along with refinancing the company debt, which is scheduled to mature in 2014.
Though the debt issue will pull the company’s debt ratio northwards and also strain its interest coverage ratio, the capital position remains supportive of its current rating level.
The rating agency acknowledges Prudential’s operating results, debt servicing capability, capital strength and diversified business profile. The company’s investment portfolio is also performing better. Investment related losses have narrowed down and commercial mortgage backed securities have yielded net unrealized gain as of Jun 30, 2013.
However, the existence of below investment grade securities in the form of subprime residential mortgage-backed securities as well as commercial real estate is a cause of concern. Also, the company has a greater overall leverage compared to its peers.
Prudential’s stock retains a Zacks Rank #2 (Buy).