Fitch lowers XL view to stable

Fitch Ratings said it affirmed the ratings of XLIT Ltd., a subsidiary of XL Group plc.

The agency also said it revised the group’s outlook to stable from positive.

The ratings affirmed include XLIT’s issuer default rating at A-, along with the BBB+ rating on its $300 million 2.3% senior notes due 2018, $400 million 5.75% senior notes due 2021, $350 million 6.375% senior notes due 2024, $325 million 6.25% senior notes due 2027 and $300 million 5.25% senior notes due 2043.

The ratings affirmed also include the BBB- rating on XLIT’s $345 million series D preference ordinary shares and $999.5 million series E preference ordinary shares.

The affirmations and outlook revision follow news that XL entered into an agreement to acquire Catlin Group Ltd. for about $4.1 billion.

The company will be marketed as XL Catlin with the transaction expected to close in mid-2015, subject to approvals, Fitch said.

The outlook revision reflects the anticipated decline in fixed-charge coverage to 4.0x to 5.0x following the acquisition due to the partial debt financing, the agency said.

Fitch said it views the transaction as an overall near-term credit negative to XL given the execution and integration risk inherent in the acquisition, as well as the increased financial and operating leverage post-merger.

But, successful execution of the deal could provide longer-term positive credit benefits of diversification of earnings and business profile, the agency added.

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