S&P Affirms Legal & General’s ‘A’ Debt Rating

March 31, 2004

Standard & Poor’s Ratings Services announced that it has “affirmed its ‘A’ long-term junior subordinated debt rating on U.K.-based Legal & General Group PLC’s (L&G; AA-/Stable/A-1+) GBP400 million ($727 million) fixed-rate, undated, reset subordinated notes, following receipt of final documentation.”

“The rating on the notes reflects the subordinated status of bondholders relative to senior creditors, and the interest deferral features. The notes are being issued under the group’s GBP2 billion Euro MTN program,” said the bulletin.

“The notes qualify as hybrid equity in Standard & Poor’s capital analysis, and as Upper Tier II capital on a regulatory basis,” stated S&P credit analyst Mark Button. He indicated that S&P “considers the issue to be a long-term feature of the Legal & General group’s capital structure and that, if redeemed, it would be replaced with similar or better quality instruments.”

S&P noted that the “issue is subordinated, undated, and has a dividend-based optional interest-deferral trigger. Call dates occur at the first reset date (April 1, 2019) and every five years thereafter. There is a step-up of 100 basis points at the first call date. Interest deferral might prove indefinite if dividends remain unpaid on junior-ranking share capital, or if regulatory intervention is continuing on the issuer or its European subsidiaries.”

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