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
RELATED CRITERIA AND RESEARCH
-- Fairfax Financial Holdings Ltd. Senior Unsecured Debt Rated 'BBB-',
Oct. 11, 2012
-- Holding Company Analysis, June 11, 2009
Fairfax Financial Holdings Ltd.
Counterparty Credit Rating BBB-/Positive/--
$450 Mil. 5.84% Sr. Unsec. Notes Due 2022 BBB-