S&P: HRG view to negative

Standard & Poor’s said it affirmed all of the ratings on HRG Group Inc., including its B corporate credit rating and revised its outlook to negative from stable.

The agency also said it affirmed the B+ rating on HRG’s $864 million senior secured notes due July 2019, which includes a tack-on offering.

The recovery rating remains at 2, indicating 70% to 90% expected default recovery.

The agency also said it affirmed the CCC+ rating on HRG’s $890 million senior unsecured notes due January 2022, which includes a tack-on offering.

The recovery rating remains at 6, indicating 0 to 10% expected default recovery.

The outlook revision reflects a belief that the company faces headwinds as it increases its debt burden during a period of transition, S&P said.

The company recently announced they are exploring strategic alternatives for

Fidelity and Guaranty Life, as well as experiencing investment write-offs in various minority investments and have lost dividend income from its majority-owned Compass Energy, the agency said.

Given these factors, the company’s weak asset diversity, limited financial flexibility and short track record with its stated investment strategy, S&P said it expects coverage metrics will remain weak and potentially volatile over the next two years.

A sale of Fidelity and Guaranty Life could also result in less diversity in what is already an investment portfolio with limited dividend income sources, the agency said, or could precipitate HRG entering into new businesses, which is a risk factor considering the company’s recent investment missteps.

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