Swiss Re’s €672m mandatory convertible security
BNP Paribas and Merrill Lynch were joint mandated lead arrangers and bookrunners
In an innovative deal that did not dilute the company’s share capital, reinsurer Swiss Re successfully placed €670m of mandatory convertible securities. Proceeds were intended to refinance maturing debt and further increase Swiss Re’s financial strength.
Crucially, no additional Swiss Re shares will be required to support the mandatory convertible securities. Underlying shares that were previously committed to Swiss Re’s convertible bond issued in 2001 (due in 2021) were reallocated to support the transaction. This was made possible by the purchase of call options that offset the exposure to deliver shares under the 2001 convertible deal.
The merits of the deal were borne out by it receiving 100% equity capital treatment from the rating agencies. Swiss Re experienced strong demand for the mandatory convertible securities from a diversified investor base and the issue was heavily oversubscribed. It will participate in any future share price appreciation of up to 20% of the exercise price.
