US based insurance provider Hartford has signed a purchase agreement with Allianz to buyback certain securities.
As per the agreement, Hartford would buy back all 10% fixed-to-floating rate junior subordinated debentures, which are due 2068, for aggregate consideration of $2.425bn with a total principal amount of $1.75bn and all outstanding warrants enabling Allianz to buy 69.35m common shares.
The agreement with Allianz will provide The Hartford with further financial flexibility and an enhanced capital structure.
Further, the transactions are anticipated to provide enhanced balance between The Hartford’s senior and subordinated debt and are expected to reduce its annual interest expense by replacing high interest coupon debt with lower coupon debt.
The repurchase of debentures is dependent on a consent solicitation to conclude a related replacement capital covenant for which the company intends to begin a consent solicitation from the holders of the 2041 notes.
The company will buyback warrants for $300m under its existing $500m equity repurchase program and expects to complete the remaining authorisation of about $106m.
Harward has issued the warrants and debentures to Allianz in 2008, following the effect to the repurchases, Allianz will hold 5% of the company’s common stock.
The repurchases are anticipated to end on 17 April 2012.