Fitch Ratings in Chicago assigned an A-minus rating Thursday to Nationwide Financial Service's proposed $200 million senior note offering and affirmed its A-minus long-term issuer rating and the ratings on all outstanding debt, with a stable outlook.
The Columbus, Ohio, insurer's proposed note issuance is to carry a 5.1% fixed rate of interest and mature in 10 years. The proceeds are to be used to repay outstanding trust-preferred securities that carry a higher coupon.
Though the transaction is basically a debt-for-debt exchange, debt-to-total capital would rise slightly, Fitch said. The fact that the trust-preferred securities received 50% equity credit explains the higher leverage. Equity credit was based on time to maturity and the company's ability to defer payment of interest on the securities.
Pro forma at June 30, the insurer's debt-to-total capital ratio was 21%, assuming the $200 million issuance with proceeds paying down trust-preferred securities.
