A.M. Best Co. has placed under review with negative implications the financial strength rating (FSR) of B+ (Good) and issuer credit ratings (ICR) of “bbb-” of the insurance subsidiaries of The Phoenix Companies, Inc. (Phoenix) (headquartered in Hartford, CT) [NYSE: PNX]. In addition, A.M. Best has placed under review with negative implications the ICR of “bb-” of Phoenix, as well as all the debt ratings on the outstanding securities issued by the group. (See below for a detailed listing of the companies and ratings.)
The rating actions follow the announcement that Phoenix is seeking consent from the bondholders to waive the indenture’s requirement to furnish timely financials to the trustee on its 7.45% Quarterly Interest Bonds due 2032. Phoenix will need consent from a majority of the bondholders in order to successfully extend the date on this requirement for the filing of third quarter 2012 financial statements. As previously announced on November 8, 2012, Phoenix declared it was postponing the release of its third quarter 2012 financial statements due to a restatement of its financial results. The company intends to file this report prior to the timely filing of its year-end 2012 Form 10-K, which has a deadline of March 18, 2013.
Phoenix is seeking to remedy this reporting covenant violation through the amendment to the indenture. Within the next 10 days, Phoenix plans to make available to its bondholders a Consent Solicitation Statement and begin outreach to the bondholders for their consent to the amendment. Phoenix’s 7.45% Quarterly Interest Bonds, with approximately $253 million outstanding, are a retail issue sold in $25 increments. They currently trade near par.
The under review status reflects A.M. Best’s concerns as to the uncertainty of achieving a successful outcome to the waiver process. A. M. Best believes Phoenix has a credible contingency strategy in place if needed, but one which significantly reduces an already limited financial flexibility. Although the current operating performance of its insurance subsidiaries is profitable, A. M. Best believes they will be materially impacted by an inability of Phoenix to obtain the necessary waiver.