Challenger Life Co. Ltd. Proposed Tier 2 Note Issuance Rated #BBB#

Stocks and Financial Services Press Releases Monday November 13, 2017 17:39
MELBOURNE--13 Nov--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Nov. 13, 2017--S&P Global Ratings today said it has assigned its long-term 'BBB' issue credit rating to Challenger Life Co. Ltd.'s (CLC; A/Positive/--) proposed unsecured subordinated notes. CLC is currently contemplating offering the notes in two tranches; one floating rate and one fixed to floating rate. If both tranches are issued, two separate deeds poll will be executed with the only differences between the two being the issue name and form of conditions relating to interest payments. CLC is a wholly owned core operating subsidiary of Challenger Ltd. Group and the group's principal operating entity.

The rating assigned to the notes is three notches below the credit rating on CLC. The following factors reflect the difference:
  • The notes' subordinated status (deduct one notch);
  • The risk of partial or untimely payment of coupons, in our view (deduct one notch); and
  • Contingent capital clauses for conversion into common equity or write-down (deduct one notch).

We have assessed the proposed issue as having intermediate equity content reflecting the note attributes as well as their very long scheduled tenor including a five year noncall period, which support the equity characteristics. We will include the value of the issue in CLC's total adjusted capital, subject to our thresholds. In our view, these notes would be able to absorb losses on a going-concern basis through nonpayment of coupons, conversion into common equity, or principal write-down. On issuance, we understand that these securities will qualify as fully compliant Tier 2 capital under the Australian Prudential Regulation Authority's requirements. These securities are due to mature 25 years from the date of issue, and have a noncall period of five years from the date of issue.

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