Is this price weakness due to the offering of the convertible shares or the negative outlook recently given to the rating by S&P??? Maybe it is all linked together. Hopefully, MHLD can continue to bring home the bacon while avoiding any major catastrophe and still support growth.
NEW YORK (Standard & Poor's) Sept. 26, 2013--Standard & Poor's Ratings
Services said today that it affirmed its 'BBB+' long-term financial strength
ratings on Maiden Insurance Co. Ltd. (Bermuda) and Maiden Reinsurance Co. and
its 'BBB-' long-term counterparty credit ratings on Maiden Holdings Ltd. (MHLD:$12.25,00$-0.15,00-1.21%) and
Maiden Holdings North America Ltd. (US). The outlook is negative.
Maiden is issuing $150 million of mandatorily convertible preferred shares,
using the proceeds to fund the growth of its business. The new preferred stock
issuance will automatically convert into common equity after three years and
will be treated as having high equity content, allowing for full credit toward
We expect this additional preferred stock issuance to push Maiden's financial
leverage to our maximum tolerances of about 40%. We also expect fixed-charge
coverage to be about 3x and leverage to drop during the next two years as
retained earnings add to the capital base.
"The rating affirmation is based on the company's satisfactory business risk
and upper adequate financial risk," said Standard & Poor's credit analyst
The negative outlook reflects our concern that Maiden's growth could erode its
capital adequacy. Also, the high leverage provides little capacity to absorb a
balance-sheet shock or raise additional debt/hybrid capital.
We could downgrade Maiden within the next 12 months if we believe the company
is unable to maintain capital adequacy at the 'A' level according to our
capital model. We expect Maiden's growth to consume a substantial amount of
capital, which could cause us to lower our scores for capital adequacy, and
consequently, capital and e