The senior secured notes due in 2023 were priced at 99.638% to give investors a yield of 4.345%. Interest will be paid on Feb. 1 and Aug. 1, starting on Aug. 1 of this year.
Proceeds are to be used to repay outstanding borrowings under its revolving credit facility and for general corporate purposes.
Prior to the pricing announcement, Fitch Ratings said it expected to assign a BBB- rating, the lowest investment grade rank. At the same time Fitch affirmed First American’s A- insurer financial strength rating.
Fitch said the title company had strong open order flow in December, up 9.3% over the same month in 2011. For the quarter, open orders are up 27.5% over 4Q11.
But the ratings agency is concerned about First American’s reserve adequacy and the potential for a slowdown in mortgage originations that many are predicting for the second half of this year.
Another issue is about First American’s reserve adequacy. For the first nine months of last year, the company’s reserves were impacted by $24.4 million. Much of that is related to a guaranteed valuation product sold in Canada which it is still selling although with altered terms and conditions. For 2011, reserves were adversely impacted by $112 million.