Bermuda’s ACE Limited announced that its subsidiary, ACE INA Holdings Inc., has agreed to sell $500 million principal amount of 5.875 percent Senior Notes due June 15, 2014. The notes are guaranteed by ACE Limited.
“The net proceeds from the sale of the senior notes will be used to repay $400 million of ACE INA Holdings Inc. notes which mature in August 2004, to redeem $75 million of subsidiary trust preferred securities and for general corporate purposes,” said the announcement.
Fitch Ratings assigned an ‘A-‘ rating to the notes, and also said it has affirmed ACE INA’s and ACE’s ‘A-‘ long-term issuer ratings, as well as the ratings on their outstanding debt, with a stable outlook.
“The new notes are fully and unconditionally guaranteed by ACE and are therefore based on ACE’s ‘A-‘ long-term issuer rating, ” said Fitch. The rating agency also said it expects the net proceeds from the issuance to be used as ACE’s bulletin indicated.
As a result Fitch said there would be a “temporary increase in ACE’s financial leverage of three-four points. However, the net change in ACE’s financial leverage after the debt retirements is expected to be insignificant.
“ACE’s interest coverage ratio improves on a pro forma basis after the refinancing transactions as the decline in interest rate on the new securities versus those retired offsets the modest increase in outstanding debt.”
Fitch’s ratings “also reflect ACE’s continued strong operating earnings and cash flow in the quarter ended March 31, 2004, improving (though still somewhat high) reinsurance leverage and increasing tangible equity,” the bulletin concluded.
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