HRG's Board of Directors has initiated a process to explore strategic alternatives available to HRG, including a merger, sale or other business combination. These actions follow HRG's prior announcement that the expected sale of portfolio company
Fitch revised HRG's Rating Outlook to Negative on
Fitch calculates that upstream dividends from HRG's subsidiaries relative to holding company interest expenses remain below 1.0x. That said, this ratio could improve should HRG use proceeds from the FGL sale to repay holding company debt, which would improve balance sheet stability as HRG evaluates strategic alternatives.
Negative rating actions may result from a sale of HRG to a lower-rated entity or sustained uncertainty with respect to HRG's strategic direction, organizational structure or ownership framework. Under a scenario where HRG is unable to identify suitable strategic alternatives, ratings could be negatively influenced by a sustained reduction in interest coverage below 1.0x; deployment of the company's current and future cash for equity-oriented means or into investments that are of a highly speculative nature and/or exhibit uncertain dividend capacity; or a deterioration in operating performance at
Ratings could be positively influenced by a sale of HRG to a more highly-rated entity or merger with another entity, the result of which is a more diversified entity with strong leverage and interest coverage metrics. Under a scenario where HRG sells its remaining investments, retires outstanding debt and effectively winds down, Fitch would expect to withdraw HRG's IDR and classify outstanding debt ratings as paid in full.
Fitch currently rates HRG Group, Inc. as follows:
--Long-Term IDR 'B', Outlook Negative;
--Senior unsecured notes 'B/RR4';
--Senior secured notes 'BB-/RR2'.
Additional information is available on www.fitchratings.com
2017 Outlook: Investment Managers
HRG Group, Inc.
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