U.K. Mutual Steam gets OK to amend perpetuals; margin set at 626.4 bps

By Susanna Moon

Chicago, June 7 - United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Ltd. said it set the margin for its outstanding $100 million perpetual subordinated capital securities.

Also, Mutual Steam Ship obtained the needed consents to amend the interest and redemption provisions of the securities.

Holders voted for the proposed amendment at a meeting in London held June 7. The voting deadline was noon ET on June 4. The consent solicitation began on May 14.

The measure was conditioned on the issuer obtaining votes for at least 75% of the outstanding principal amount of the securities.

Holders who delivered consents by noon ET on May 24 will receive a consent payment of $5 per $1,000 principal amount.

Margin set, pricing details

The new margin was set at 626.4 basis points, using the five-year dollar mid-swap rate of 1.181% and the six-year dollar mid-swap rate of 1.443%, at 5:30 a.m. ET on Friday, with the resulting interpolated mid-swap rate of 1.236% and the new fixed interest rate of 7.5%, according to a company press release.

Interest will be Libor plus 626.4 bps, beginning Aug. 22, 2018.

The new fixed rate had been expected to be at least 6.75%, the company previously said.

The company said on May 28 that it was proposing to pay semiannual interest of 7.5% on the securities for five years beginning Aug. 22 through Aug. 22, 2018. Interest would be payable quarterly after Aug. 22, 2018 at Libor plus the new margin set on June 7.

The issuer also proposed to push out the call option for five years from Aug. 22 to Aug. 22, 2018.

The amendment also clarified the issuer's right to call the securities if there is a change to regulatory capital rules, a previous press release noted.

The purpose of the proposal is to preserve the tier 1 capital treatment provided by the securities in a proactive and cost-effective manner that maintains the value of the securities and that may provide a better investment proposition for holders in light of the approaching first call date on Aug. 22, the company previously said.

If the securities are not redeemed on the first call date on Aug. 22, the coupon would have changed from a fixed rate of interest of 9% per year to Libor plus 481.5 bps up to but excluding the interest payment date in August 2018 and to Libor plus 581.5 bps after that.

The solicitation agent is UBS Ltd. (attn: liability management group, +44 20 7567 0525 or email mark-t.watkins@ubs.com), and the tabulation agent is Lucid Issuer Services Ltd. (attn: David Shilson / Thomas Choquet, +44 20 7704 0880 or email ukpi@lucid-is.com).

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