Standard & Poor's Ratings Services has lowered its long-term counter-party credit rating on Geneva Finance to selective default (SD).
"The rating action follows shareholder and subordinated noteholder approval on March 31, to convert existing debt interests to equity which, in our view, constitutes a distressed exchange, considering the conversion price is higher than the current market value of shares, and noting the limited liquidity of Geneva's shares," S&P said.
An SD rating is assigned when S&P believes that the obligor has selectively defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner, according to the company's website.
It includes the completion of a distressed exchange offer.
"We anticipate that the rating on Geneva will revert to a level no higher than CCC, following our further discussions with Geneva's management and our subsequent analysis of the insurer's business and financial profiles - including an evaluation of its prospects of operating as a viable entity in the future," credit analyst Peter Sikora said.
The insurer financial strength rating on Geneva's captive insurer, Quest Insurance Group (Quest), was affirmed at CC and removed from creditwatch with developing implications.
A positive rating outlook has been assigned on the Quest rating.
"The rating on Quest is expected to be positioned in line with that of Geneva, given its role within the group as a captive financial insurer," Sikora said.