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Fidelity National (FNF) Prices Senior Notes Worth $450M
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Fidelity National Financial, Inc. (FNF - Free Report) has announced the pricing of $450 million aggregate principal amount of Senior Notes. The notes carry an interest rate of 4.50% with maturity scheduled on Aug 15, 2028.
Following the release of this news, the company gained 0.3% in the last trading session.
The company priced the senior notes at 99.252%, which will yield 4.594% on maturity. These notes will pay interest on a semi-annual basis – on February and August, 2019.
Fidelity National plans to utilize the net proceeds of the issuance to settle its outstanding 4.25% convertible senior notes, set to mature in August 2018 on conversion, in cash, along with repayment of borrowings under its revolving credit facility and the remaining portion for general corporate purposes.
Fidelity National displays its prudence by issuing senior notes amid a still low interest rate environment to procure funds. By capitalizing on this low interest rate environment, the company is attempting to reduce its interest burden, facilitating the margin expansion. In the first half of 2018, the company witnessed a decline in interest expense, which declined 24.1% from the same period in 2017. Also, the company’s operational strength should enable it to service debt uninterruptedly, maintaining its creditworthiness.
As of Jun 30, 2018, notes payable of the company was worth $320 million, down 3.3% from $759 million at the end of 2017. The debt-to-capital ratio on Jun 30, 2018 was 13.8%, down 80 basis points from 14.6% at 2017 end. However, the latest offering will increase the debt-to-capital ratio by 670 basis points.
Concurrently, the credit rating giant Moody’s Investors Service has assigned a Baa2 rating to the aforementioned senior notes. The outlook for the ratings remained stable.
The assigned rating represents Fidelity National’s operating efficiency, which has helped the company maintain and cement its market-leading position as the largest title insurer in the United States with solid profitability. The stable outlook denotes the property and casualty (P&C) insurer’s strong operational performance and a disciplined expense management related to real estate cycles.
The rating giant has notified some of the factors that could lead to a rating upgrade. These include keeping the profit margins in low double digits (10%) or better via the title insurance cycles, interest coverage above 8x, holding company cash flow coverage of interest above 5x along with a long-term commitment to a decent adjusted financial leverage below 30% and an unadjusted leverage below 20%.
On the flip side, the factors that could lead to a rating downgrade include profit margins in mid-single digits, execution risk regarding the Stewart Information Services buyout, interest coverage below 5x as well as adjusted financial leverage above 30% (including a large debt financed acquisition).
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence as well as maintaining creditworthiness of a stock. Whereas rating downgrades not only hamper business but also increase the cost of future debt issuances. We believe that such ratings will help Fidelity National retain investors’ trust and write more businesses going forward.
Zacks Rank and Share Price Movement
Currently, Fidelity National holds a Zacks Rank #2 (Buy). Shares of the company have gained 1.9% year to date, underperforming the industry’s rise of 3.8%. However, we expect sustained operational performance, strong performing title business and a solid capital position to turn the stock around in the near term.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 17.61%.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company pulled off positive surprises in all the trailing four quarters with an average positive surprise of 29.85%.
Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance plus related services, primarily in the United States. The company came up with positive surprises in all the preceding four quarters with an average beat of 9.19%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Fidelity National (FNF) Prices Senior Notes Worth $450M
Fidelity National Financial, Inc. (FNF - Free Report) has announced the pricing of $450 million aggregate principal amount of Senior Notes. The notes carry an interest rate of 4.50% with maturity scheduled on Aug 15, 2028.
Following the release of this news, the company gained 0.3% in the last trading session.
The company priced the senior notes at 99.252%, which will yield 4.594% on maturity. These notes will pay interest on a semi-annual basis – on February and August, 2019.
Fidelity National plans to utilize the net proceeds of the issuance to settle its outstanding 4.25% convertible senior notes, set to mature in August 2018 on conversion, in cash, along with repayment of borrowings under its revolving credit facility and the remaining portion for general corporate purposes.
Fidelity National displays its prudence by issuing senior notes amid a still low interest rate environment to procure funds. By capitalizing on this low interest rate environment, the company is attempting to reduce its interest burden, facilitating the margin expansion. In the first half of 2018, the company witnessed a decline in interest expense, which declined 24.1% from the same period in 2017. Also, the company’s operational strength should enable it to service debt uninterruptedly, maintaining its creditworthiness.
As of Jun 30, 2018, notes payable of the company was worth $320 million, down 3.3% from $759 million at the end of 2017. The debt-to-capital ratio on Jun 30, 2018 was 13.8%, down 80 basis points from 14.6% at 2017 end. However, the latest offering will increase the debt-to-capital ratio by 670 basis points.
Concurrently, the credit rating giant Moody’s Investors Service has assigned a Baa2 rating to the aforementioned senior notes. The outlook for the ratings remained stable.
The assigned rating represents Fidelity National’s operating efficiency, which has helped the company maintain and cement its market-leading position as the largest title insurer in the United States with solid profitability. The stable outlook denotes the property and casualty (P&C) insurer’s strong operational performance and a disciplined expense management related to real estate cycles.
The rating giant has notified some of the factors that could lead to a rating upgrade. These include keeping the profit margins in low double digits (10%) or better via the title insurance cycles, interest coverage above 8x, holding company cash flow coverage of interest above 5x along with a long-term commitment to a decent adjusted financial leverage below 30% and an unadjusted leverage below 20%.
On the flip side, the factors that could lead to a rating downgrade include profit margins in mid-single digits, execution risk regarding the Stewart Information Services buyout, interest coverage below 5x as well as adjusted financial leverage above 30% (including a large debt financed acquisition).
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence as well as maintaining creditworthiness of a stock. Whereas rating downgrades not only hamper business but also increase the cost of future debt issuances. We believe that such ratings will help Fidelity National retain investors’ trust and write more businesses going forward.
Zacks Rank and Share Price Movement
Currently, Fidelity National holds a Zacks Rank #2 (Buy). Shares of the company have gained 1.9% year to date, underperforming the industry’s rise of 3.8%. However, we expect sustained operational performance, strong performing title business and a solid capital position to turn the stock around in the near term.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry can also consider Alleghany Corporation , NMI Holdings Inc. (NMIH - Free Report) and The Progressive Corporation (PGR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 17.61%.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company pulled off positive surprises in all the trailing four quarters with an average positive surprise of 29.85%.
Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance plus related services, primarily in the United States. The company came up with positive surprises in all the preceding four quarters with an average beat of 9.19%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>