December 13, 2012 / 2:15 PM / in 5 years

TEXT-S&PBulletin: Radian rtgs unaffected by sr. note exchange

Dec 13 - Standard & Poor’s Ratings Services said today that its ratings and outlook on Radian Group Inc. (NYSE: RDN; CCC+/Negative/--) and its subsidiaries are unaffected by the company’s announcement of an offer to eligible holders to exchange any and all of Radian’s outstanding 5.375% senior notes due June 15, 2015 (old notes), for a new series of 9.000% senior notes due June 15, 2017 (new notes), and additional cash consideration in certain circumstances. Under our criteria for exchange offers, we would consider an exchange tantamount to a default where, in our view, the investor would receive less value than promised under the original securities and the offer is distressed rather than opportunistic. We do not consider this exchange offer to be distressed because, in our opinion, investors are receiving reasonable value relative to the original notes through the higher coupon rate and the additional cash consideration, notwithstanding an extended maturity to 2017. The higher coupon rate is broadly consistent with rates observed for companies with similar creditworthiness. The new notes will not be traded in public exchanges but we believe the loss in liquidity premium is compensated by the exchange terms. It is also unlikely the old notes would trade at a premium before their maturity in 2015 given the company’s current financial distress. In addition, investors can choose not to participate in the program. Despite the exchange improving RDN’s ability to avoid a default in 2015, the company’s financial profile remains under pressure, and significant risks remain due to potential adverse development in reserves and ongoing losses from new notices of default. RDN’s holding company has $368.3 million in liquid resources, so such that we expect RDN to be able to meet the higher interest payments in the near term.

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