U.K. Mutual Steam to pay 7.5% rate on perpetuals if granted consent

By Susanna Moon

Chicago, May 28 - United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Ltd. said it set the proposed new fixed rate for its outstanding $100 million perpetual subordinated capital securities.

The London-based mutual insurance association is proposing to pay semiannual interest of 7.5% on the securities for five years beginning Aug. 22 through Aug. 22, 2018, according to a press release. Interest would be payable quarterly after Aug. 22, 2018 at Libor plus a new margin to be set on June 7.

As previously reported, Mutual Steam Ship is seeking consents to amend the interest and redemption provisions of the securities. The consent solicitation began on May 14.

Holders will vote on the proposed amendment at a meeting in London on June 7. The voting deadline is noon ET on June 4.

The new fixed rate had been expected to be at least 6.75%. The new margin will be set on the date of the meeting by reference to the new fixed interest rate and the interpolated USD mid-swap rate, the company previously said.

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

The amendment also would clarify the issuer's right to call the securities if there is a change to regulatory capital rules, the previous 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 said.

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

The measure is 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.

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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