S&P rates Ascot notes BBB-

S&P said it assigned a BBB- issue-level rating to Ascot Group Ltd.’s $400 million of 10-year 4.25% senior unsecured notes due 2030.

The issue-level rating is a notch below Ascot’s issuer rating, reflecting the potential principal payment risk. Under the notes’ terms, Ascot cannot redeem the notes on the scheduled maturity date if it breaches the Bermuda Monetary Authority’s enhanced capital requirement immediately before or after the redemption of these notes unless Ascot replaces them with securities having equal or better capital treatment under the BMA’s group supervision rules, S&P said.

“The interest payments on the securities will continue. The failure to repay the notes on their scheduled maturity date for failing to comply with the BMA’s ECR test will not constitute an event of default under the indenture or accelerate any repayments on the notes. Therefore, we reflect the payment risk of such a loss absorption feature by deducting one notch from the level of the issuer credit rating to arrive at the issue rating,” the agency said in a press release.

Ascot plans to use the proceeds for general corporate purposes. For the year ending Dec. 31, we expect Ascot’s financial leverage to be about 16% following the notes’ issuance. “We also expect EBITDA fixed-charge coverage will be about 8x-9x over 2020-2022. The proposed senior unsecured debt issuance is expected to receive tier 3 capital treatment under the BMA’s capital requirement rules, upon confirmation from the BMA of group supervision of Ascot Group Ltd.,” the agency said.

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