The outlook assigned to this Credit Rating (rating) is stable, which is in line with the outlook of Generali's Long-Term Issuer Credit Rating (Long-Term ICR).
The notes were issued by Generali under its EUR 15 billion euro medium term note programme that was renewed in June 2019 and supplemented in September 2019. The senior dated subordinated notes will pay a fixed annual coupon of 2.124% until their due date in October 2030.
Generali intends to use the proceeds of this issue to partially finance the buyback of up to EUR 1 billion of outstanding subordinated debt callable in 2022, in line with its strategy to reduce total debt by EUR 1.5 to EUR 2.0 billion by year-end 2021, and reduce ongoing finance costs.
The notes are designated by Generali as a "green bond." The proceeds will be invested in a number of asset classes with positive environmental impact including green buildings, renewable energy and sustainable water management.
Generali's financial leverage ratio has decreased slightly following the buyback and issue of these notes. AM Best will continue to monitor Generali's interest coverage and leverage ratios.
The rating of the senior dated subordinated notes is two notches below Generali's Long-Term ICR, reflecting the fact that they are subordinated to Generali's senior creditors, but senior to any of the company's deeply and more deeply subordinated obligations.
The notes will rank pari passu with Generali's more senior dated subordinated notes for so long as certain legacy Tier 2 notes, being subordinated obligations being issued at 4 June 2019 which are expressed to be senior subordinated obligations with a specified maturity date if and for so long as their terms and conditions do not permit the issuance of subordinated obligations ranking senior thereto, are outstanding.
The senior dated subordinated notes would rank junior to the more senior dated subordinated ones thereafter, which could result in an increase of the notching gap between the rating of the senior dated subordinated notes and Generali's Long-Term ICR.