Nov 28 - Fitch Ratings has assigned a 'BBB-' rating to Prudential Financial,
Inc.'s (PFI) issuance of $500 million of 5.75% junior
subordinated notes due in 2052.
Fitch expects proceeds from the debt issuance to be used in part to refinance
certain outstanding debt 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
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 related in part
to the pre-funding of upcoming debt maturities, 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%. 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
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 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 commercial paper (CP) above 10% of total debt on a sustained
basis; a total financing and commitments ratio 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 holding company
triggers noted above.
Fitch has assigned the following rating:
Prudential Financial, Inc.
--5.63% junior subordinated notes due Nov. 15, 2043 'BBB-'