Fitch Upgrades Loews' IDR to 'A+'; Outlook Stable

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CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded Loews Corporation's (Loews; NYSE: L) Issuer Default Rating (IDR) and debt ratings as follows:

--Issuer Default Rating (IDR) to 'A+' from 'A';

--Senior unsecured notes to 'A+' from 'A'.

Fitch has also revised Loews' Rating Outlook to Stable from Positive. Approximately $700 million of debt is affected by this rating action.

The upgrade reflects both the improved credit profiles at Loews and its operating subsidiaries since the height of the credit crisis. Key among these improvements include increased cash balances at the parent company, continued strong cash receipts in the form of dividends from Loews' operating subsidiaries, and the reduced probability of cash injections into the company's operating subsidiaries.

Specific improvements at the operating subsidiary level include the completion of Boardwalk Pipeline Partners, LP (Boardwalk; NYSE: BWP) multi-year pipeline expansion projects and the resulting improved operating cash flows and reduced capital expenditures that will result. Additionally, the improvements in financial markets have resulted in a lower probability for additional capital injections into CNA Financial Corporation [CNA; NYSE: CNA]. While market conditions have begun to improve modestly for the offshore drilling sector, Fitch continues to expect Diamond Offshore (Diamond; NYSE: DO) to continue paying special dividends.

Future positive rating actions will likely be limited going forward and would stem from additional diversity among operating companies as well as substantially improved credit profiles for all operating companies in the Loews portfolio. Negative rating actions could stem primarily from a change in the use of the Loews balance sheet, deterioration in the credit quality of the operating companies and/or substantial capital requirements by the operating companies.

In addition, the rating continues to reflect Loews' historically stable credit profile and robust balance sheet including significant cash balances and low debt levels at the parent level, combined with the continued upstreaming of sizable dividends by Loews' subsidiaries ($720 million in 2010). Fitch regards Loews' holding company structure as a significant benefit to lenders, as it protects bondholders from operating and legal risks at the subsidiary level while the large cash balances, significant current and projected future dividends, and the ability to liquidate holdings provide substantial protections and enable the company to comfortably meet all interest and principal obligations.

Offsetting factors are the structurally subordinated position of Loews' bondholders to the cash flows of the company's subsidiaries. This risk is mitigated by both the returns earned on the large cash and securities portfolio maintained at Loews (estimated at $187 million in 2010) and the substantial cash and securities balances exceeding parental debt levels resulting in negative net debt balances (current net cash balance of $3.784 billion or 5.4 times over-collateralized).

Loews maintains liquidity from cash and equivalents ($4.652 billion at March 31, 2011 at the parent company level); net investment income ($187 million in 2010); intercompany dividends ($720 million in 2010); and the ability to sell investments and shares in publicly traded subsidiaries (including CNA, Boardwalk and Diamond Offshore with Loews ownership interest currently valued at $15.3 billion). Loews' recently repaid its $175 million, 8.875% debentures at maturity in April 2011 and the company's next debt maturity is not until March 2016 when the $400 million of 5.25% senior notes come due. Loews does not maintain a credit facility at the parent company level. Additionally, there are no parental guarantees by Loews Corp. for any of the subsidiaries. There are also no cross default clauses between subsidiaries, or between the parent corporation and any of the operating subsidiaries.

Fitch currently rates Loews' other operating subsidiaries as follows with a Stable Outlook:

CNA

--IDR 'BBB';

--Senior unsecured debt 'BBB-'.

Boardwalk Pipelines, LP

--IDR 'BBB';

--Senior unsecured debt 'BBB';

--Short-term IDR 'F2'.

Texas Gas Transmission, LLC

--IDR 'BBB+';

--Senior unsecured debt 'BBB+';

--Short-term IDR 'F2'.

Gulf South Pipeline Company, LP

--IDR 'BBB+';

--Senior unsecured debt 'BBB+';

--Short-term IDR 'F2'.

Loews is a holding company with subsidiaries engaged in the following lines of business: commercial property and casualty insurance (CNA, a 90% owned subsidiary); natural gas and oil exploration and production (High Mount Exploration & Production LLC, a wholly owned subsidiary); the operation of interstate natural gas transmission pipeline systems (Boardwalk Pipelines, LP, a 66% owned subsidiary); the operation of offshore oil and gas drilling rigs (Diamond Offshore, a 50.4% owned subsidiary); and the operation of hotels (Loews Hotels Holding Corporation, a wholly owned subsidiary).

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Relevant Research:

--'Corporate Rating Methodology' (Aug. 16, 2010).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

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CONTACT:

Fitch Ratings
Brian Bertsch, +1-212-908-0549
Media Relations, New York
brian.bertsch@fitchratings.com
or
Primary Analyst:
Adam M. Miller, +1-312-368-3113
Director
Fitch Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst:
Mark C. Sadeghian, CFA, +1-312-368-2090
Senior Director
or
Committee Chairperson:
Sean T. Sexton, +1-312-368-3130
Managing Director