AmTrust Financial Services, Inc
) has announced the sale of 6.125% senior notes, dated Aug 15,
2023. The company has agreed to sell the notes for a total price
of $250 million.
The interest on the 10-year notes will be paid semi-annually on
Aug 15 and Feb 15 of each year. The first interest will be due on
Feb 15, 2014.
The estimated net proceeds of $247.3 million will be deployed to
meet working capital requirements, capital expenditure and/or to
fund strategic acquisitions.
Furthermore, A.M. Best Co. assigned a debt rating of "bbb" with a
stable outlook to these notes. Concurrently A.M. Best also
affirmed the ratings of AmTrust Financial and subsidiaries.
AmTrust Financial's debt to equity ratio at second quarter end
was 23.4%, up 300 basis points from 2012-end level. With the new
issuance, the ratio is expected to move up by 1500 basis points.
The rating agency estimates adjusted debt-to-total capital and
adjusted debt-to-tangible capital to reach highest historical
levels at about 27% and 40%, respectively.
Additionally, AmTrust Financial needs to dish out about $15.3
million in interest annually. In the last reported quarter,
interest expense climbed up nearly 8.8% to $7.6 million.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence on the stock
as well as maintaining credit worthiness in the market.
Therefore, rating downgrades adversely affect the business, apart
from increasing the costs of future debt issuances. We believe
that strong ratings will help AmTrust Financial retain investor
confidence and help it write more businesses going forward.
Last week, AmTrust Financial reported operating earnings per
share of 86 cents for the second quarter of 2013. The results
were significantly better than the Zacks Consensus Estimate of 76
cents and the year-ago figure of 64 cents. Growth was primarily
driven by significant improvement in top line and agency
acquisitions implemented in the past one year. The positives were
partially offset by higher-than-expected expenses.
AmTrust Financial presently carries a Zacks Rank #3 (Hold).
Property and casualty insurers,
Everest Re Group Ltd
Global Indemnity plc
HCI Group, Inc
) look attractive. These stocks carry a Zacks Rank #1 (Strong
AMTRUST FIN SVC (AFSI): Free Stock Analysis
GLOBAL INDEMNTY (GBLI): Free Stock Analysis
HCI GROUP INC (HCI): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
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