XL Capital plans to sell up to $325 million of senior notes due 2027 pursuant to XL's currently effective shelf registration statement.

XL intends to use the net proceeds from the sale of its senior notes, together with available cash, to retire $825m aggregate principal amount of its 2.53% senior notes due 2009 which comprise part of its 6.50% equity security units which settle on May 15.

Following the announcement AM Best gave a "stable" outlook rating regarding the senior notes.

The agency noted that at March 31 XL's unadjusted debt-to-capital leverage ratio (including preferred securities) stood at approximately 33 percent, which includes the recent $1 billion preferred security issuance, the proceeds from which are primarily to be used for the purchase of approximately $830m of XL's Class A ordinary shares.

"The company's financial leverage has trended lower since 2005, in line with AM Best's expectations, driven by strong earnings in 2006 and higher income in first quarter 2007 from both insurance operations and investment affiliates, with debt-to-capital leverage ratios remaining commensurate with its current debt ratings," said AM Best in a statement.

"Despite this improvement, however, leverage has remained above similarly rated peers. AM Best expects XL Capital's coverage and leverage ratios to further improve moderately barring any extraordinary catastrophes as projected earnings increase shareholders' equity and the holding company's liquidity."