A.M. Best Co. has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and issuer credit rating to “a-” from “bbb” of Standard Casualty Company (Standard Casualty) (New Braunfels, TX). Both ratings have been removed from under review with negative implications and assigned a stable outlook.
Standard Casualty’s ratings had previously been downgraded on September 17, 2010, due to the uncertainty of its former parent company, Palm Harbor Homes, Inc.’s (Palm Harbor) credit facility, debt obligations and liquidity requirements, which could have resulted in a potential burden on Standard Casualty.
The ratings of Standard Casualty were placed under review on November 22, 2010, based on Palm Harbor’s deteriorating financial condition and the possibility that it might be forced to seek protection under U.S. bankruptcy laws. On November 29, 2010, Palm Harbor and five of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Standard Casualty was not included in the filing.
In March 2011, Palm Harbor’s assets were sold to Cavco Industries, Inc. (Cavco) [NASDAQ: CVCO] in a process pursuant to Section 363 of the Bankruptcy Code, and in June 2011, the acquisition of Standard Casualty was completed, following regulatory approval.The rating upgrades reflect Standard Casualty’s new structure as a subsidiary of Cavco, one of the leading producers of factory-built homes in the United States. In addition, the ratings recognize Standard Casualty’s solid risk-adjusted capitalization and generally favorable operating performance. While the ratings for Standard Casualty are stable, positive rating actions could occur if there is a sustainable long-term improvement in its operating performance, capital strength and business profile. However, negative rating actions could occur if there is a prolonged decline in the company’s underwriting profitability and/or considerable deterioration in its capital strength as measured by A.M. Best’s capital model.
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