March 7, 2017 / 9:43 PM / in 4 months

Fitch Rates Enstar Senior Notes 'BBB-'

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(The following statement was released by the rating agency) CHICAGO, March 07 (Fitch) Fitch Ratings has assigned a rating of 'BBB-' to Enstar Group Limited's (Enstar) issuance of $350 million 4.5% senior notes due 2022. KEY RATING DRIVERS The new issuance is rated equivalent to Enstar's senior shelf registration. The net proceeds will be used to repay a portion of the company's revolving credit facility and Sussex term loan facility, with any remaining net proceeds used for general corporate purposes. Enstar's financial leverage ratio of 19.3% at Dec. 31, 2016 is not expected to change meaningfully given the issuance will be used to replace existing debt. Fitch calculates Enstar's annualized run rate fixed charge coverage at approximately 10x, which is viewed as very strong, albeit down from 13.1x in 2016. Enstar's debt of $673.6 million at Dec. 31, 2016 consists of $535.1 million outstanding borrowings under a revolving credit facility, $75 million under a term loan facility and $63.5 million outstanding from a Sussex term loan facility that was utilized to partially fund the acquisition of Sussex Insurance Company in 2015. This new senior debt issuance represents Enstar's initial public debt offering. RATING SENSITIVITIES Key rating triggers that could lead to an upgrade include continued business profile enhancement such that individual acquisitions and new business transactions have a more muted impact on the overall financial profile; further improvements in the financial strength and credit quality of the active underwriting businesses; and sustained risk-adjusted capital growth commensurate with business and reserve/exposure growth. Any potential future upgrade would likely be limited to one notch; however, due to the nature of the company's business model in acquiring large blocks of runoff business which can materially alter the company's balance sheet within a short time horizon, and thus places some constraints on the rating. While this risk has been managed well to date, it adds potential near-term capital, earnings and business/exposure mix variability at levels greater than experienced by most insurance companies operating under more traditional business models. Key rating triggers that could result in a rating downgrade include failure to generate continued material levels of favorable non-life run-off reserve development (which Fitch views as a key indicator of a successful run-off); additional capital needs to support the current run-off business; significant new transaction(s) that Fitch views as materially increasing the overall risk profile; net leverage ratio above 3.5x; declines in the financial strength of the active business due to sizeable underwriting losses or other factors; financial leverage ratio approaching 30%; and operating earnings-based interest coverage below 5x. FULL LIST OF RATING ACTIONS Fitch has assigned the following rating: Enstar Group Limited --$350 million 4.5% senior unsecured notes due 2022 'BBB-'. Fitch currently rates Enstar Group Limited as follows: --Issuer Default Rating 'BBB'; --Senior shelf registration 'BBB-'. The Rating Outlook is Stable. Contact: Primary Analyst Brian C. Schneider, CPA, CPCU, ARe Senior Director +1-312-606-2321 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst James B. Auden, CFA Managing Director +1-312-368-3146 Committee Chairperson Keith M. Buckley, CFA Managing Director +1-312-368-3211 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020195 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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