Posted on 19 Mar 2010
Moody's Investors Service has affirmed the credit ratings of The Hartford Financial Services Group, Inc. (NYSE: HIG; senior debt rated Baa3) and its key operating subsidiaries following the company's announcement that it intends to repay the $3.4 billion previously received under the Capital Purchase Program (CPP) created under the Troubled Asset Relief Program (TARP).
The transaction is to be partially funded through a new capital raise of approximately $3.05 billion, which will include $1.1 billion of senior debt, $500 million in mandatory convertible preferred stock, and $1.45 billion in new common stock. The outlook on the company's ratings remains stable.
According to Moody's Vice President Paul Bauer, "We believe that the overall impact of The Hartford's intended recapitalization will be largely neutral, with modest negatives and positives offsetting each other." Mr. Bauer explained that, "The impact of the capital plan will be positive from the standpoint of the company's franchise strength and market reputation by removing the perceived stigma of TARP funding. At the same time, this is offset by a moderate deterioration in the company's financial flexibility and capital adequacy due to the use of cash to fund part of the TARP repayment."