Prudential Financial Inc.#s Proposed Senior Notes Rated #A#

Stocks and Financial Services Press Releases Wednesday November 22, 2017 08:55
CENTENNIAL--22 Nov--S&P Global Ratings

CENTENNIAL (S&P Global Ratings) Nov. 21, 2017--S&P Global Ratings today assigned its 'A' debt rating on Prudential Financial Inc.'s (NYSE:PRU) proposed series of senior notes due Dec. 7, 2047, and Dec. 7, 2049. PRU will not receive any cash proceeds from the issuance of these new notes. These new notes are part of a debt-for-debt exchange offer the company announced today.

These new notes will be PRU's unsecured and unsubordinated obligations and will rank pari passu with existing senior indebtedness. They will have optional redemption features allowing PRU to redeem them in whole or in part, at a make-whole price, prior to the applicable par call date. The total issuance amount of these two series will depend on the acceptance of the exchange offer and could be about $650 million each. PRU will pay interest on the new notes at a rate equal to the calculated yield corresponding to the bid-side price of the 2.750% U.S. Treasury due Aug. 15, 2047 as of the pricing time, plus a fixed spread (120 basis points for the 2047 notes and 123 basis points for the 2049 notes).

As per the offering memorandum, the pricing of the new notes, the total consideration, and the exchange consideration will be done on Dec. 6, 2017. PRU also reserves the right to extent or terminate any exchange offer. The existing medium-term notes (MTN) that are eligible for the exchange offer are divided into two pools:

  • $650 million of Pool 1 (in order of priority) notes includes: 6.625% MTN Series D due 2037, 5.9% MTN Series D due 2036, 5.75% MTN Series B due 2033, and 5.4% MTN Series C due 2035; and
  • $650 million of Pool 2 (in order of priority) notes includes: 6.2% MTN Series D due 2040, 5.8% MTN Series D due 2041, 5.625% MTN Series D due 2041, and 5.1% MTN Series D due 2043.

We view this debt-for-debt exchange to be neutral for PRU's financial leverage and likely positive for fixed-charge coverage. We expect PRU to maintain financial leverage (including hybrids, unfunded pension obligations, and net present value of operating leases) of about 30% and fixed-charge coverage around 8x-9x.

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