Bermuda-Based Holding Company Sirius International Group#s Subordinated Notes Rated #BB+#

Stocks and Financial Services Press Releases Friday September 22, 2017 17:28
LONDON--22 Sep--S&P Global Ratings
LONDON (S&P Global Ratings) Sept. 22, 2017--S&P Global Ratings today assigned its 'BB+' long-term issue level credit rating to the subordinated notes issued by Sirius International Group Ltd.

The rating on the notes is two notches below the long-term issuer credit rating on Sirius International Group Ltd. (BBB/Stable/--). One notch reflects the notes' subordinated status and one notch reflects its interest deferral features. The rating incorporates our understanding that: The bonds are subordinated to senior creditors;The issuer has discretion to cancel interest payments;Interest cancellation is mandatory if a solvency capital event (breach of solvency capital requirement) has occurred at Sirius International Group or other regulatory group members, or in the event of the insolvency of Sirius International Group; andThe bonds will be eligible as Tier 2 capital under the Bermuda Monetary Authority's solvency rules.

We understand that the notes have a contractual maturity of 30 years but are callable at par after five years. The notes carry a floating rate of interest with a coupon of STIBOR +400 basis points. There is a minimal step-up in the coupon rate (25 basis points) after 10 years.

Sirius also has the option to redeem the bonds at par before the first call date under specific circumstances such as for changes in tax, regulatory, or rating agency treatment.

The bonds will classify as having intermediate equity content under our criteria. Hybrid capital instruments with intermediate equity content can comprise up to 15% of total adjusted capital (TAC), which is the basis of our consolidated risk-based capital analysis of insurance companies. Inclusion in TAC is also subject to the issue being considered eligible for regulatory solvency regarding both the amount and terms and conditions.

We believe that Sirius will use the proceeds to redeem the $250 million of preference shares it currently holds in its capital base. We project that Sirius' financial leverage (debt plus hybrid capital, divided by the sum of economic capital available, debt, and hybrid capital) will not be materially impacted by the issuance and remain about 25%-30%. We anticipate that the fixed-charge coverage (EBITDA divided by senior and subordinated debt interest) will improve and be well in excess of 4x in 2018-2019.


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