By Rebecca Melvin
Princeton, N.J., Dec. 8 - Swiss Reinsurance Co. priced CHF1 billion of three-year mandatory convertibles at par to yield 6% with a 20% initial conversion premium.
The convertibles priced at the cheap end of talk which was for a dividend of 5.5% to 6%.
There is a greenshoe of CHF300 million.
The minimum conversion price is CHF95.60. Swiss Re will retain the upside on any future share price appreciation up to 120% of the minimum conversion price and a fraction of any further upside. Swiss Re stock closed at CHF96.25 Thursday.
The mandatory offering was sold via bookrunners Credit Suisse First Boston and JP Morgan to institutional investors outside the United States, Canada, Japan, Australia and Italy.
Net proceeds will be used to help fund Swiss Re's previously announced $6.8 billion acquisition of General Electric Co.'s GE Insurance Solutions and for general corporate purposes.
When Swiss Re announced the GE acquisition last month it said it planned to raise up to $7.5 billion in new capital, including up to $5.5 billion in shares and mandatory convertibles. The plan also included raising $2 billion in hybrid debt securities.
Zurich, Switzerland-based Swiss Re is a reinsurance and financial services group.
The deal looked "marginally attractive," at about 100.2, at the cheap end of the talk assuming volatilities of 24% and 22.3% at the minimum and maximum conversion prices of 100% and 120% respectively, dividends per share of CHF2.50 paid in 2006, CHF2.70 in 2007 and CHF3.05 in 2008 in line with the dividend protection thresholds, stock borrow cost of 50 basis points, and a 20 bps credit spread, according to a group of analysts with a sellside firm based in the United Kingdom.
| Issuer: | Swiss Reinsurance Co.
|
| Issue: | Mandatory convertibles
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| Bookrunners: | Credit Suisse First Boston and JP Morgan
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| Amount: | CHF1 billion
|
| Greenshoe: | CHF300 million
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| Maturity: | December 2008
|
| Coupon: | 6%
|
| Price: | Par
|
| Yield: | 6%
|
| Conversion premium: | 20%
|
| Conversion price: | CHF95.60
|
| Pricing date: | Dec. 8
|
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