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In order to refinance an earlier debt, American Financial Group Inc. (AFG - Snapshot Report), has issued notes worth $125 million. The notes bear an interest rate of 5.75% and are scheduled to mature on August 25, 2042. However, the company will allow the redemption at 100% of the principal amount plus accrued and unpaid interest on these notes from August 25, 2017.
The company is also expected to submit an application for the listing of these unsecured senior notes on The New York Stock Exchange. On receiving approval from the regulatory bodies, trading should begin in 30 days after issuance, with the “AFA” symbol.
The proceeds from this issue will be used to buy back 7.125% senior debenture worth $115 million, scheduled to mature in 2034. The redemption amount will not only include the principal but also the interest accrued, excluding the date of redemption. The proceeds will be used to finance the daily operations of the American Financial Group and aid its working capital.
Merrill Lynch, the financial management and advisory unit of Bank of America Corporation (BAC - Analyst Report), UBS Securities LLC, an operating unit of UBS AG (UBS - Analyst Report) and Wells Fargo Securities, LLC, a unit of Wells Fargo & Company (WFC - Analyst Report), are the joint bookrunning managers for the sale of these notes.
The company’s closest competitor, MetLife Inc. (MET - Analyst Report), also recently vended senior unsecured notes worth $750 million with an interest rate of 4.125%, scheduled to mature on February 15, 2042. The notes will be utilized for business operations and to retire senior notes worth $750 million that are due to mature in August and November 2013.
According to Reuters, Moody’s Investor Service of Moody's Corp. (MCO - Analyst Report), has conferred a rating of Baa2 to the senior unsecured notes issued by American Financial Group, with a positive outlook and a rating of “a3” on the senior notes of MetLife with a stable outlook. Both the companies retain a Zacks #3 Rank, which translates into a short-term Hold rating.
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