TEXT - S&P says Fairfax Financial debt unchanged after add-on

Thu Jan 17, 2013 11:05am EST

Jan 17 - Standard & Poor's Ratings Services said today that its 'BBB-' senior debt rating on Fairfax Financial Holdings Ltd.'s (FFH) senior notes is unchanged following the company's announcement that it has increased the size of the issue to C$450 million from C$200 million. This series of notes was originally issued for C$200 million on Oct. 15, 2012, with a 10-year term and a 5.84% annual coupon paid semiannually. The current C$250 million notes are an expansion of this series and have identical terms. The company will use the proceeds of this issue to increase its cash, short-term investments, and marketable securities position, to retire outstanding debt and other corporate obligations, and for general corporate purposes. As of Sept. 30, 2012, the company's debt leverage of 25% and financial leverage of 34% were within our expectations for the rating. We expect the C$250 million add-on to have a modest impact on those metrics, and financial leverage to remain less than 35%. We base our issue rating on the notes on our counterparty credit rating on FFH (BBB-/Positive/--), reflecting the company's enhanced and well-diversified global footprint in reinsurance and insurance and strong operating performance mostly driven by consistent total returns on its investment portfolio. Offsetting these positive factors are substantial catastrophe exposure that can create earnings volatility, underwriting performance in some business segments lagging peers', and reserving risk due to its significant long-tail casualty loss reserves. Strong capitalization somewhat offsets these weaknesses. RELATED CRITERIA AND RESEARCH

-- Fairfax Financial Holdings Ltd. Senior Unsecured Debt Rated 'BBB-', Oct. 11, 2012

-- Holding Company Analysis, June 11, 2009 RATINGS LIST Fairfax Financial Holdings Ltd. Counterparty Credit Rating BBB-/Positive/-- $450 Mil. 5.84% Sr. Unsec. Notes Due 2022 BBB-