A.M. Best Co. has assigned a senior debt rating of "a-" to HCC Insurance Holdings, Inc.'s (HCC) (NYSE: HCC) (Houston, TX) recently issued $172.4 million, 2.0%, unsecured convertible notes, due 2021. The existing financial strength and debt ratings of HCC's life/health and property/casualty insurance subsidiaries are unaffected. The outlook on all ratings is stable.
The new notes were recently tendered and accepted in exchange for the outstanding 2.0% convertible notes, also due in 2021. During the offering period, almost all of the $172.4 million of the principal amount of the old notes were exchanged for the new notes. The new HCC notes have the same interest rate, redemption terms and maturity dates as the existing notes. However, the terms stipulating when HCC can repurchase the new notes from note holders has been deferred to the first possible date of September 1, 2006 to September 1, 2007. Similarly, the first possible date note holders can require HCC to repurchase the new notes is also September 1, 2006 to September 1, 2007. In addition to these changes, the new notes provide for additional rights upon a change in control, giving HCC the right to pay cash and stock or cash only to the note holders upon conversion.
As of September 30, 2004, HCC's financial leverage (total debt and preferred stock to total capital) was 21.7%. Despite the third quarter hurricanes and the net losses incurred during that quarter, HCC generated a net income of $106.8 million through the first nine months of 2004 compared to $93.1 million over the same period in 2003.
The following debt rating has been assigned with a stable outlook:
HCC Insurance Holdings, Inc.--
-- "a-" on 'new' $172.4 million 2.0% unsecured convertible notes, due 2021
The following debt ratings remain unaffected:
HCC Insurance Holdings, Inc.--
-- "a-" on 'old' $172.4 million 2.0% unsecured convertible notes, due 2021
-- "a-" on $125 million 1.3% unsecured convertible notes, due 2023
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