Bonds get BBB+ from S&P and Baa1 from Moody’s

Rating agencies Standard & Poor’s (S&P) and Moody’s have rated Direct Line Group’s proposed bond issue in the triple-B range.

S&P has rated the proposed bonds BBB+ and Moody’s has assigned a (P) Baa1(hyb) rating to the issue. S&P’s BBB+ is equivalent to Baa1 on the Moody’s rating scale.   

The proposed £250m-£500m of bonds, revealed yesterday, have a 30-year maturity, are callable after 10 years, and are guaranteed by UK Insurance (UKI) the core underwriting entity of the Direct Line Group.

Moody’s rates UKI’s insurance financial strength at A2. S&P rates UKI A.

The provisional Moody’s rating is based on the expectation that there will be no material differences between current and final documentation.

The proposed bonds will qualify as Tier 2 capital under Solvency II.

Direct Line Group John Reizenstein told Insurance Times in November that the insurer was considering a subordinated debt issue to help boost return on equity and pay a dividend to current parent bank RBS.

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