Key rating drivers that could lead to a downgrade of MetLife's ratings include NAIC risk-based capital ratio below 350%, a Prism scored well into the 'Strong' category, financial leverage above 30%, run-rate ROE below 10%, and GAAP fixed charge coverage ratio
* Fixed charge coverage ratios
ranging from 1.35 to 1.50.
Many financial management textbooks, such as Block & Hirt (2005), define the fixed charge coverage ratio
as the ratio of income before fixed charges and taxes to fixed charges, with fixed charges defined as the sum of interest expenses and operating lease payments (sometimes also referred to as rental expenses).
The company currently has approximately $175M in revolving credit availability, taking into account the $50M reserve necessary given the company's current fixed charge coverage ratio
. The company has $20M currently drawn on its revolving credit facility.
The company said the amended terms include revisions to leverage ratio, fixed charge coverage ratio
, applicable rate as well as its annual excess cash flow.
- FFO fixed charge coverage ratio
sustained at or above 3.5x:
The second is a fixed charge coverage ratio
of not less than 1.05 to 1, as provided in the facility.
Debt servicing capacity is considered strong and has been stable over recent periods with a fixed charge coverage ratio
of 9.8x in 1H18, while holding company cash remains robust.
The new minimum fixed charge coverage ratio
of 1.25 times is only tested if availability falls below certain levels.
For example, Bristow Group, Inc., which is moderately larger and more geographically diverse than PHI but generates more than 70% of its revenues from oil and gas customers, had a FFO fixed charge coverage ratio
and an adjusted leverage ratio of 1.0x and 11.0x, respectively, at the end of 2017.
These amended terms and conditions include an extension of the maturity date to April 2018; a decrease in fees and interest rates; improved advance rates on eligible inventory and required compliance with a fixed charge coverage ratio
if availability under the facility falls below USD35m, or 10% of the commitments then in effect.
Fitch views the issue as positive for VIVAT's financial leverage ratio due to the equity credit given to the notes, and expects only limited impact on VIVAT's fixed charge coverage ratio