Fitch Rates Loews' $1B Sr. Notes Issuance 'A+'; Affirms L-T IDR at 'A+'
CHICAGO -- May 2, 2013
Fitch Ratings has affirmed Loews Corporation's (Loews) long-term Issuer
Default Rating (IDR) at 'A+' and its associated senior unsecured debt ratings
at 'A+'. Additionally, Fitch has assigned a rating of 'A+' to the company's $1
billion issuance of senior notes. The Rating Outlook is Stable.
Key Rating Drivers:
Loews' ratings reflect the company's robust credit profile supported by
recurring dividend payments from its three publicly traded subsidiaries (CNA
Insurance, Diamond Offshore and Boardwalk Pipeline), unrestricted cash and
marketable securities at the parent company and its equity market value of its
subsidiaries. In 2012, Loews received $683 million in dividends and interest
from its publicly traded subs and recorded another $61 million investment
income from its investment portfolio. After deducting Loews' operating
expenses, interest expenses, taxes and dividends to its shareholders,
approximately $528 million remained as free cash flow. Cash and marketable
securities totaled $3.7 billion at Loews as of March 31, 2013. Finally,
prorata equity value in the company's three publicly traded subsidiaries
totals approximately $17 billion. Pro-forma for the offering, debt will be
$1.7 billion at the company.
Fitch sees Loews' holding company structure as beneficial to noteholders as it
shields it from operating and legal risks at the subsidiary company level
while receiving large dividend payments from some of those subsidiaries. Loews
does not provide parental guarantees for any of its subsidiaries' debt, and
there are no cross default provisions between the holding company and its
subsidiaries. In addition, the structure provides noteholders comfort in the
form of large cash balances at the parent and the potential to monetize equity
holdings in subsidiary companies.
Liquidity is maintained through the previously mentioned cash and marketable
securities at the holding company, dividend payments from subsidiaries and
investment income and the ability to monetize a portion of its equity
investments in affiliates. Loews' nearest maturity is $400 million of senior
notes due March of 2016.
Negative: Future developments that may, individually or collectively, lead to
negative rating action include:
--Significant increases in debt at the Loews level;
--Substantial deterioration in the credit profile of subsidiary companies;
--Substantial capital requirements by a subsidiary.
Positive: Future developments that may, individually or collectively, lead to
positive rating action include:
--Increase in diversification by industry in the makeup of subsidiary holdings
while maintaining a conservative credit profile at the holding company.
Fitch affirms Loews' ratings as follows:
--Long-term IDR at 'A+';
--Senior unsecured notes at 'A+'.
The Rating Outlook is Stable.
Loews is a holding company with subsidiaries engaged in the following lines of
business: commercial property and casualty insurance (CNA, a 90% owned
subsidiary); natural gas and oil exploration and production (HighMount
Exploration & Production LLC, a wholly owned subsidiary); the operation of
interstate natural gas transmission pipeline systems (Boardwalk Pipelines, LP,
a 55% owned subsidiary); the operation of offshore oil and gas drilling rigs
(Diamond Offshore, a 50.4% owned subsidiary); and the operation of hotels
(Loews Hotels Holding Corporation, a wholly owned subsidiary).
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology', Aug. 8, 2012.
Applicable Criteria and Related Research
Corporate Rating Methodology
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Sean T. Sexton, CFA, +1-312-368-3130
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
Daniel Harris, +1-312-368-3217
Tim Greening, +1-312-368-3205
Brian Bertsch, +1-212-908-0549
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