September 5, 2012 / 9:25 PM / 5 years ago

TEXT-S&P rates CNO Financial Group

Sept 5 - Standard & Poor's Ratings Services said today that it has assigned
its 'B+' issue level rating to CNO Financial Group Inc.'s (CNO) $250
million senior secured notes due 2020. The company expects to use the proceeds
to repay an existing credit facility and for refinancing. At the same time, we
assigned our preliminary 'B+' issue-level rating (the same as on the existing
facility) to CNO's $250 million senior secured term loan due in 2016 and to the
$400 million senior secured term loan due in 2018. All ratings are subject to
review upon receipt of final documentation. In addition, we assigned our
preliminary 'B+' issue-level rating to CNO's proposed $50 million senior secured
revolving credit facility.
"We believe this will provide CNO with modest improvements in financial 
flexibility by extending maturities out several years, with the next large 
obligation ($379 million) due in September 2018," said Standard & Poor's 
credit analyst Kevin Maher. "These actions will provide adequate cushion above 
covenants on the new senior secured credit agreement. Capital and earnings are 
the key covenants that could come under pressure. We believe that operating 
company's fundamentals should support the growth of capital and maintain a 
cushion above the covenants over the next several years, absent any further 
significant investment losses or unexpected declines in the good operating 
performance."

The refinancing transactions will repay the senior credit facility ($224 
million outstanding) due in 2016, $275 million of 9% senior secured notes due 
2018, and repurchase approximately $200 million (for $334 million) of 7% 
convertible senior notes due 2016 from entities affiliated with Paulson & Co. 
CNO will refinance these with a $250 million four-year term loan, a $400 
million six-year term loan, and this $250 million note issuance.

The primary sources of cash at the holding company are dividends from the 
operating companies, interest on surplus debentures, and management and 
investment fees. Financial leverage will be less than 24% and EBITDA 
fixed-charge coverage should be about 7x following the close of all the 
refinancing transactions in September 2012. We do not expect overlap of 
existing debt and refinanced debt by more than a month. We consider CNO's core 
operating companies' risk-adjusted capitalization to be a ratings weakness as 
measured by our capital model.

RELATED CRITERIA AND RESEARCH
     -- CNO Financial Group Inc. Outlook Revised To Positive From Stable; 
Ratings Affirmed, Aug. 3, 2012
     -- Holding Company Analysis, June 11, 2009
     -- Interactive Ratings Methodology, April 22, 2009

RATINGS LIST

CNO Financial Group Inc.
 Counterparty Credit Rating
  Local Currency                        B+/Positive/--

New Rating
CNO Financial Group Inc.
 $250 mil sr sec notes due Sept 2020    B+

Preliminary Rating Assigned
CNO Financial Group Inc.
 $250 mil sr sec term due 2016          B+(Prelim)
 $400 mil sr sec term due 2018          B+(Prelim)
 $50 mil sr sec revolver                B+(Prelim)

Our Standards:The Thomson Reuters Trust Principles.
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