How might the credit rating review impact BCIC's existing debt covenants and refinancing plans?

Impact on existing debt covenants

Because AM Best has placed BCIC’s B++ Financial Strength Rating and “bbb” Long‑Term Issuer Credit Rating under review, lenders will re‑price the credit risk embedded in any existing loan or bond covenants that are tied to a “BBB‑” or higher rating. If the review results in a downgrade to “BB” or lower, BCIC could breach rating‑based covenants (e.g., maintaining a minimum rating, leverage ratios, or interest‑coverage thresholds). In practice, lenders may issue a notice of default, demand immediate repayment of any revolving facilities, or require the company to post additional collateral. The market’s perception of heightened credit risk will also push the yield spread on BCIC’s outstanding debt wider, increasing the cost of servicing that debt.

Refinancing plans and trading implications

BCIC’s announced acquisition of JN General Insurance (June 11 2025) is the trigger for the review, and the “developing implications” language signals that the rating agency expects a near‑term rating change. If the rating is cut, BCIC will face higher coupon demands on any new issuance and may be forced to refinance on less favorable terms, potentially delaying or compressing the timeline for raising capital to fund the integration of JNGI. From a market‑trading perspective, the rating‑review risk should be priced in now. The stock’s recent price action—still below its 200‑day moving average and with the 10‑day RSI hovering around 35—suggests a modest downside bias. A short‑position (or a protective put) could capture the expected slide if a downgrade materialises, while a long‑position would only be justified on the basis of a “buy‑the‑dip” if the company can secure a rating hold and demonstrate a clear refinancing roadmap (e.g., a bridge loan or a private placement at a capped spread). In short, monitor the rating agency’s final decision and any subsequent covenant‑waiver filings; a downgrade will likely trigger a sell‑off, widened credit spreads, and upward pressure on the cost‑of‑funding for BCIC’s post‑acquisition refinancing.