Standard & Poor’s Ratings Services has assigned its preliminary “A”‘ junior subordinated debt rating to the proposed perpetual, subordinated, fixed/floating-rate step-up notes to be issued by Generali Finance B.V. (not rated) and unconditionally and irrevocably guaranteed by Italy’s Assicurazioni Generali SpA (rated “AA”/Stable/–).
S&P assigned the same rating to the proposed perpetual, subordinated, fixed/floating-rate step-up notes to be issued by Assicurazioni Generali SpA. “The ratings are based on the assumption that the actual note issues will, for all material purposes, be consistent with the advance information provided to Standard & Poor’s in order to undertake its analysis,” said the bulletin.
S&P said it “categorizes the notes under both issues as ‘strong,’ given their equity-like characteristics, being at the upper level of its Category 2 (intermediate equity content) classification. This reflects: (1) the notes’ subordinated nature; (2) the notes’ optional and mandatory interest deferability; and (3) the fact that the notes have no final maturity date.
“The rating on these issues reflects the financial strength of the guarantor and of the overall Generali group (Generali), the deeply subordinated nature of the notes, and the discretionary and mandatory interest-deferral features.”
S&P explained that the “mandatory deferral feature of the notes is applicable upon either regulatory intervention to restore solvency or a mandatory deferral event, linked to a net income and capital test. A mandatory deferral event will be triggered if: (1) Generali’s cumulative consolidated net income for the two half-year periods ending on the semiannual reporting date preceding the latest one is less than zero; and (2) Generali’s adjusted shareholders’ equity (on a consolidated basis) has declined by 10 percent or more over the 24 months prior to the semiannual reporting date preceding the latest one; and (3) on the latest semiannual reporting date, adjusted capital has declined by more than 10 percent over the prior 30 months.
“Mandatorily deferred interest can only be settled through an alternative coupon-settlement mechanism (ACSM), which includes the proceeds from the issuance of shares of Assicurazioni Generali SpA, subject (in the case of a mandatory deferral event) to a maximum of 2 percent of share capital in each calendar year; or through a sale of treasury stock; or by issuing hybrid securities with terms and conditions at least similar to those of the notes, subject (in the case of a mandatory deferral event) to a maximum of 15 percent of the initial issue amount, and all subject, upon becoming due, to a five-year time limit.
“The notes also include an optional interest-deferral clause in the event that, during the prior year, Generali (subject to specified limited exceptions) does not pay a dividend or interest on any class of its shares or parity securities, and does not repurchase or redeem any class of its shares or parity securities. Optionally deferred interest is expected to be cumulative, as it is required to be settled by proceeds raised through an ACSM, subject, upon becoming due, to a five-year time limit.”
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