TEXT-Fitch rates Harbinger Group debt issuance

Wed Dec 12, 2012 2:22pm EST

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Dec 12 - Fitch Ratings has assigned a 'B/RR4' rating to Harbinger Group
Inc.'s (HRG) proposed issuance of a new seven year, $650 million senior
secured security.

HRG plans to use the new security to finance its tender offer for the existing
$500 million issue of 10.625% senior secured notes and for general corporate
purposes. Fitch plans to withdraw the 'B/RR4' rating on the existing notes once
the tender offer is completed.

Proposed financial covenants in the new security are similar to the existing
debt, although Fitch believes new covenant levels will provide slightly more
cushion to HRG. The larger size of the new security will increase leverage by a
relatively small amount but does not have a material effect on Fitch's ratings.
Parent company only financial leverage will increase to 59% from 55% at fiscal
year-end, Sept. 30, 2012. Fitch estimates consolidated Debt to Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) will increase to 4.3x
from 4.0x at fiscal year-end, Sept. 30, 2012. Interest coverage will also not be
appreciably affected by the larger size of the new security since it also has a
lower expected interest rate of 8%. This translates to roughly the same interest
cost of the current 10.625% security.

Key rating triggers that could lead to a downgrade include a reduction in
Fidelity & Guaranty Life Insurance's (F&G Life) ordinary statutory dividend
capacity to below $40 million, a change in Spectrum Brand's (SPB) strategy to
reduce leverage to between 2.5x to 3.5x within 18 to 24 months, an increase in
consolidated leverage to the 6x range, an increase in HRG (parent only)
financial leverage ratio to above 70%, and the deployment of existing cash
balances that increases the enterprise's credit risk.

Key rating triggers that could lead to an upgrade include a significant increase
in F&G Life's ordinary statutory dividend capacity from its current level of
approximately $80 million, a reduction in consolidated leverage to the 4x range,
a reduction in HRG (parent only) financial leverage ratio below 40%, and the
deployment of existing cash balances that improves the magnitude and diversity
of cash flows to HRG.

HRG is a NYSE-traded holding company that is majority owned by investment funds
affiliated with Harbinger Capital Partners LLC (Harbinger). Harbinger
established HRG as a permanent capital vehicle to obtain controlling equity
interests in established, dividend paying businesses that operate across a
diversified set of industries. The company currently operates in three business
segments: consumer products through its 57.5% ownership in SPB, insurance
through its wholly owned subsidiary F&G Life, and Salus, an asset based lending
business.

Fitch has assigned the following rating to HRG:

--$650 million 8% senior secured notes due December 2019, 'B/RR4'.

Fitch currently rates HRG as follows:

--Long-term Issuer Default Rating (IDR) 'B', Outlook Stable.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Oct. 18, 2012);
--'Corporate Rating Methodology' (Aug. 8, 2012).

Applicable Criteria and Related Research:
Insurance Rating Methodology - Amended
Corporate Rating Methodology
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