HSBC tenders for Swiss Re’s 6.854% perpetual step-up preferreds

By Jennifer Chiou

New York, March 18 – HSBC Bank plc announced the start of its tender offer for the $750 million outstanding liquidation preference of 6.854% perpetual subordinated step-up preferred securities issued by Swiss Re Capital I LP and guaranteed on a subordinated basis by Swiss Reinsurance Co. Ltd.

The bank is also concurrently tendering for a portion of ELM BV’s €1 billion of 5.252% perpetual step-up notes and two series of Australian dollar-denominated notes.

According to a news release, the company said that the maximum amount of U.S. dollar notes that it will accept is contingent on the results of the concurrent euro tender offer and will be equal to the U.S. dollar equivalent of the excess of €750 million over the amount payable for the euro notes accepted for purchase in the offer, excluding accrued interest.

For each $1,000 principal amount of 6.854% securities, the company will pay a total consideration of $1,067.50, including a $50.00 early tender consideration for those who participate prior to 5 p.m. ET on March 31. The amount does not include accrued interest.

The offer will end at 5 p.m. ET on April 15.

Offer background

The company said that the offer is part of a series of transactions through which Swiss Re seeks to exchange with HSBC outstanding debt securities, including subordinated notes that represent substantially all of the assets of Swiss Re Capital, for new euro-denominated perpetual subordinated fixed-to-floating callable loan notes to be issued by Swiss Re.

The exchange will be made under an exchange settlement agreement, and the new loan notes are to be acquired by a vehicle against the issuance of perpetual fixed-to-floating notes, the release stated.

The total amount available to purchase preferred securities in the offer and the euro and Austalian dollar notes is €750 million.

Concurrent offers

The bank is offering to purchase the A$300 million of 7.635% perpetual step-up notes and A$450 million of floating-rate perpetual step-up notes.

The amount accepted will be equal to the excess of the initial available payment amount over the euro payable amount, plus the amount in euro equal to the U.S. dollar offer’s total consideration.

The release noted that following the early tender deadline, if the U.S. dollar aggregate total consideration determined as of the early deadline is less than the maximum U.S. dollar payment amount, the maximum U.S. dollar payment amount at the final expiration time could be lower – and could be zero –depending on the level of acceptances in the concurrent Australian dollar tender offer.

If the aggregate liquidation preference of preferred securities validly tendered for purchase at or prior to the early tender deadline exceeds the aggregate liquidation preference of preferred securities that could be purchased with the maximum U.S. dollar payment amount, the preferreds tendered at or prior to the early tender deadline will be accepted for purchase as of the early deadline, subject to proration.

In that scenario preferred securities tendered after the early tender deadline will not be accepted for purchase. In this case, the concurrent Australian dollar tender offer will be terminated.

Settlement is anticipated on April 17.

The dealer managers are BofA Merrill Lynch (888 292-0070 or call collect 980 683-3215; 44 20 7995 2929 in Europe; kulwant.bhatti@baml.com), Commerzbank AG (49 69 136 59920; Liability.Management@commerzbank.com), Deutsche Bank AG, London Branch (855 287-1922 or call collect 212 250-7527; 44 20 7545 8011 in Europe; liability.management@db.com), HSBC Bank plc (888 HSBC-4LM or call collect 212 525-5552; 44 207 992 6237 in London; liability.management@hsbcib.com) and UBS Ltd. (888 719-4210 or call collect 203 719-4210; 44 20 7567 0525; mark-t.watkins@ubs.com.)

The tender and information agent is Lucid Issuer Services Ltd. (44 20 7704 0880; attn: David Shilson / Sunjeeve Patel at swissre@lucid-is.com).

Swiss Re is a reinsurance company based in Zurich.

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