Fitch puts St. Paul on positive watch

Fitch Ratings said it has placed its BBB+ long-term senior debt and F2 commercial paper ratings of The St. Paul Cos. Inc. on Rating Watch positive following the announcement that The St. Paul Cos. and Travelers Property Casualty Corp. will merge through a tax-free exchange of stock.

Concurrent with its rating actions on Saint Paul Cos., Fitch said it has placed its ratings of Travelers, including Travelers A long-term senior debt rating, on Rating Watch negative.

Fitch said it expects to upgrade St. Paul Cos.' long-term debt rating to A- or A at the close of the merger, subject to further analysis. The expected upgrade reflects the company's merger with a higher-rated entity.

Travelers uses less financial and operating leverage, and generates higher run-rate earnings levels, than St. Paul. As a result, Fitch said it believes that the merged company's earnings-based interest coverage will be moderately higher than that currently generated by St. Paul.

Fitch also said it believes that over time, the merged company will benefit from enhanced scale and efficiencies as it consolidates various parts of its operations. Furthermore, Fitch believes that the merged company's size will enable it to bolster its competitive position in ways that would have been more difficult for St. Paul to accomplish on its own.

Due to St. Paul's and Traveler's large size and relative complexity, Fitch said it believes that this merger carries a significant amount of integration risk. This risk is mitigated somewhat by the management teams involved.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.