Moody's could lower Friends Provident

Moody's Investors Service said it placed Friends Provident plc's Baa1 senior debt and guaranteed junior subordinated debt ratings on review for downgrade after the company announced it would merge with Resolution plc to form the new Friends Financial Group in all-share offer.

Moody's said the company could benefit from the proposed deal as part of a larger group with substantially positive operating cash flow. Friends Provident also recently improved its financial profile by moderating its financial leverage and strengthening capitalization, the agency said.

Moody's said the company also maintains high-risk assets, has leaned on outside borrowing to finance acquisitive growth and has lower levels of capitalization at operating company levels, Moody's said.

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