Fitch Ratings reiterated the long term Issuer Defaults Rating (“IDR”) at 'A+’ of Loews Corporation (L). The rating agency also affirmed the senior unsecured debt ratings at 'A+.' The outlook remains stable.
The rating affirmations came on the back of its solid credit portfolio, supported by huge dividend payments from the subsidiaries, considerable cash and investments as well as its equity value in its subsidiaries.
Loews is expected to receive a dividend of $600 million from three of the largest subsidiaries, which is almost the same as it received in 2011. Also, this amount exceeds the amount spent by the company under the heads of operating expenses, interest and dividends.
Fitch also noted that Loews’ holding-company structure safeguards noteholders from operating and legal risks at the subsidiary level, while at the same time it continues to receive dividends. Loews also does not guarantee debt at the subsidiaries.
Loews continues to possess a solid liquidity based on its cash and investments, dividend received from subsidiaries and its capability to liquidate a portion of its equity affiliate investments as per requirement.. Also, Loews also does not have any debt maturing in the near term; its next maturity is scheduled for March 2016.
However, downside risks to the rating stems from erosion in credit quality of the subsidiaries or huge capital requirements. Also, modification in the use of the Loews' balance sheet could act a downside.
We believe the company’s strong ratings scores will help retain investor confidence and help it to write more businesses going forward, thereby improving the results.
We retain our Outperform recommendation on Loews Corporation. The quantitative Zacks #1 Rank (short term Strong Buy rating) for the company indicates a boost on the stock over the near term.
Headquartered in New York, Loews Corporation is a diversified holding company. The company’s principal subsidiaries are CNA Financial Corporation (CNA), Diamond Offshore Drilling Inc. (DO), Boardwalk Pipeline Partners LP, Loews Hotels Holding Corporation and HighMount Exploration & Production LLC.
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