CNO Financial Sells Credit Facility - Analyst Blog

In order to pay down the existing senior credit facility, CNO Financial Group Inc. (CNO) has agreed to sell senior secured notes, and use the proceeds under a new senior secured credit facility along with CNO Financial's available cash.

CNO Financial intends to use the proceeds of $300 million of senior secured notes due in 2017, along with cash available with the company. Further, to finance the credit facility, CNO Financial has planned to borrow a new $325 million senior secured credit line, which would mature in 2016.

The 2017 debt will be offered to qualified institutional buyers as per the Rule 144A under the Securities Act of 1933.

Concurrently, the rating agency Standard & Poor's Ratings Services assigned a 'B-' rating to CNO Financial's $300 million senior secured notes issue, and also placed the rating on CreditWatch with positive implications, till the completion of the refinancing.

On December 1, CNO Financial intended to replace the $652 million senior secured facility due 2013, with the $325 million senior secured credit facility due 2016. The remaining balance was expected to be refinanced with an issuance of senior secured notes and cash on hand.

At the same time, the rating agency Moody's of the Moody's Corporation (MCO) stated that it will raise the ratings on CNO Financial's senior secured credit facilities, once the company is on track to execute the refinancing plan.

The debt extension is expected to increase the company's capital flexibility and operating leverage by reducing CNO's financial leverage until at least 2016. The company's debt-to-total capital ratio improved to 20.8% as of September 30, 2010 from 21.5% at the end of December 31, 2009.

The refinancing decision will help the company effectively utilize funds and tap growth opportunities.