TEXT - Fitch rates Prudential Inc

Fri Nov 16, 2012 3:47pm EST

Nov 16 - Fitch Ratings has assigned a 'BBB-' rating to Prudential Financial, Inc.'s (PFI) issuance of $1.5 billion of 5.63% fixed- to floating-rate junior subordinated notes due in 2043. Fitch expects proceeds from the debt issuance to be used to refinance certain outstanding debt with higher interest expense and for general corporate purposes. Fitch's view of PFI's financial leverage is not affected by this transaction. Fitch expects PFI's financial leverage ratio (FLR) to be near 35% at year-end 2012. Based on Fitch's rating criteria, this hybrid debt issuance has not been assigned any equity credit. The company's FLR was 36% as of Sept. 30, 2012 compared to 32% at year-end 2011. The ratio increased due to an increase in financial debt and to PFI's adoption on Jan. 1, 2012 of a new accounting standard for deferred acquisition costs, which reduced shareholders equity and increased the ratio by about 2%, and prefunding of debt maturities. Total Leverage, including all operating leverage, at Sept. 30, 2012 was modestly lower at 41% compared to 42% at year-end 2011. Fitch last reviewed and affirmed PFI's ratings on April 19, 2012. The affirmation of PFI's ratings reflects Fitch's view that the company's recent financial performance and balance sheet fundamentals remain consistent with rating expectations. Key rating triggers that could result in an upgrade of PFI's operating and holding company ratings are: continued reduced reliance on short-term funding; progress reducing the financial leverage ratio to the mid-20% range and total leverage below 40%; GAAP interest coverage in the 8x-10x range (based on pre-tax adjusted operating earnings); stated NAIC risk-based capital (RBC) ratio remaining near current levels; and Japan solvency margin ratio above 700%. Key rating triggers that could result in a downgrade of PFI's holding company ratings (i.e. wider notching from the operating company) include: an FLR above 35%; outstanding CP above 10% of total debt on a sustained basis; a TFC above 1.5x; and/or a GAAP interest coverage ratio below 5x. Triggers that could result in a downgrade of both operating and holding company ratings include: a stated NAIC RBC ratio below 400%, and Japan solvency margin ratio below 600%, as well as a more significant breach of the above noted holding company triggers. Fitch has assigned the following rating: Prudential Financial, Inc. --5.63% junior subordinated notes due Nov. 15, 2043 'BBB-'

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