S&P rates Humana debt BBB+

Standard & Poor’s said it assigned its BBB+ senior unsecured debt ratings to Humana Inc.’s planned $1.75 billion debt issuance, which will consist of a mix of five-, 10- and 30-year notes.

The agency expects Humana to use the proceeds to redeem/repurchase its existing $500 million 6.45% senior notes due June 1, 2016, fund share repurchases within its new $2 billion share repurchase program and for general corporate purposes.

Net debt will increase $1.25 billion.

S&P expects debt-to-capital to increase up to about 30% (on a reported basis) and 33% (on Standard & Poor’s basis), pro forma as of June 30, 2014. This is line with our expectations that Humana would eventually increase leverage toward its long-term target of 25%-30% (it has been at 20%-25% in recent years). Humana's pro forma leverage will remain lower than its publicly traded managed care peers. We expect pro forma EBITDA interest coverage will remain strong at approximately 11 times to 12 times for full year 2014-2015.

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