) is offering 5.30% senior secured notes worth $250 million with
maturity scheduled on Nov 15, 2023. However, the market has not
reacted to this development with the share price remaining almost
The proceeds from the issuance will be deployed for general
corporate purposes, debt repayment and other capital management
activities. The offer is slated to close on Nov 21, 2013.
ProAssurance has maintained a low debt profile so far in 2013.
The company had outstanding debt of $125 million as of Dec 31,
2012, that remained outstanding as of Sep 30, 2013 as well. The
debt-to-capital ratio for ProAssurance as of Sep 30, 2013 was
0.05x, almost in line with that at year-end 2012. However, with
the issuance of the $250 million debt, the debt-to-capital ratio
is projected to deteriorate.
The new issuance would require ProAssurance to pay an annual
interest of $13.25 million. Nevertheless, the company's solid
operational performance generates enough funds to service the
debt uninterruptedly. Interest expense in the first nine months
of 2013 reduced 45.8% year over year to $1.09 million. This will,
however, increase with the issuance of the new debt.
Moody's Investors Service, the credit rating wing of
) has assigned this debt issuance a "Baa2" rating with a stable
outlook. The ratings came on the back of ProAssurance's strong
market position, robust operating profitability and claims
handling capacity. Other strengths that contributed to the rating
were the high quality investment portfolio and reserve position.
As per Moody's, the above issuance will increase ProAssurance's
financial leverage to about 10% on a proforma basis.
In Jul 2013, another insurer,
American Equity Investment Life Holding Co.
) offered 6.625% senior unsecured notes worth $400 million with
maturity scheduled for Jul 15, 2021.
ProAssurance carries a Zacks Rank #3 (Hold). However, some
better-ranked stocks in the same sector include
Navigators Group Inc.
) and American Equity. While Navigators Group carries a Zacks
Rank #1 (Strong Buy), American Equity carries a Zacks Rank #2
AMER EQUITY INV (AEL): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
NAVIGATORS GRP (NAVG): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
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