MOODY'S ASSIGNS "baa3" PREFERRED STOCK RATING TO AMERICAN ANNUITY CAPITAL TRUST III
New York, 5/21/1997 -- Moody's Investors Service assigned a "baa3" preferred stock rating to the $75 million remarketed par securities ("ROPES") of American Annuity Capital Trust III, along with a Baa3 senior debt rating to the debentures which rank on a parity with all other senior unsecured obligations of American Annuity Group, Inc. (AAG). The ROPES have been sold in a privately negotiated transaction without registration under the Securities Act of 1933 ("the Act") under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. Moody's expects a significant portion of the proceeds from the sale of the debentures to be used to pay down outstanding debt.
American Annuity Capital Trust III will issue common securities to be held by AAG Holding, Inc. (AAG Holding) and $75 million of ROPES will be offered to investors. The Trust will invest the proceeds from the ROPES issuance in "resettable rate debentures", due 10/15/2041, issued by AAG Holding. AAG will guarantee the obligations of the Trust, the payment of distributions, and the payments on liquidation of the Trust or redemption of the ROPES, but only in each case to the extent of funds held by the Trust. The Trust will exist for the sole benefit of issuing securities representing undivided beneficial interests in its assets and for investing the proceeds in the debentures issued by AAG Holding.
Until the remarketing settlement date (9/28/2001), the debentures of AAG Holding will be senior unsecured obligations and will rank on a parity with all other senior unsecured obligations. Thereafter, the debentures will be subordinate and will be junior in right of payment to all other indebtedness.
At the remarketing settlement date, the investor has the option to tender their existing securities or elect to receive new remarketed capital securities issued by American Annuity Capital Trust III. If the remarketing is not successful, AAG Holding will redeem the ROPES. If the remarketing is successful, Moody's plans to assign a preferred stock rating to the remarketed securities and a subordinated debt rating to the underlying debentures.
The rating assignment reflects the marginal effect that this transaction will have on AAG's leverage and fixed charge coverage ratios. Since Moody's upgraded the group's credit ratings in October 1996, American Financial Group (AFG), AAG's 80%-owner, has continued to focus on its defined core insurance businesses, while managing its significantly reduced consolidated debt and preferred stock burden and its overall cost of capital. The consolidated fixed charge coverage ratio has also improved, though less substantially.
The following ratings were confirmed:
American Financial Corporation -- senior debt of Baa3.
American Premier Underwriters, Inc. -- subordinated debt of Ba1.
American Annuity Group, Inc. --senior debt of Baa3; and subordinated debt of Ba1.
American Annuity Group Capital Trust I -- preferred stock of "ba1".
American Annuity Group Capital Trust II -- preferred stock of "ba1".
American Financial Capital Trust I -- preferred stock of "ba1".
Great American Insurance Company -- insurance financial strength of Baa1.
Atlanta Casualty Company -- insurance financial strength of Baa1.
Republic Indemnity Company of America -- insurance financial strength of Baa1.
Great American Life Insurance Company -- insurance financial strength of Baa1.
American Financial Group, Inc. is a holding company which, through its operating subsidiaries, is active in specialty and multi-line property and casualty insurance, as well as the sale of interest-sensitive tax-deferred annuities and certain life and health insurance products. AFG reported consolidated assets of $15.2 billion and shareholders' equity of $1.5 billion, as of March 31, 1997. AAG reported consolidated assets of $7.2 billion and shareholders' equity of $416 million, as of March 31, 1997. The firms are headquartered in Cincinnati, Ohio.
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