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RSA in £500mn debt raise as part of refinancing

UK insurer RSA has raised £500mn of subordinated debt to bolster its financial flexibility ahead of any call on its existing EUR500mn subordinated guaranteed bonds.

A spokesperson explained that RSA has the right to buy back the EUR debt in October 2009 but cannot confirm its plans until 60 days prior to the call date.

The issue of lower tier two subordinated debt was priced on 12 May and is due to settle on 20 May. It pays a coupon of 9.375 percent with a launch spread of 565 basis points over the benchmark gilt. It is callable on 20 May 2019.

RSA said it expects the transaction - which will be listed on the London Stock Exchange - to gain a BBB+ rating by Standard and Poor's, and Baa1 by Moody's.

RSA's announcement comes after Lloyd's made a gain buying back the equivalent of £102mn of its outstanding corporate debt earlier this month, following a successful tender to investors to sell their holdings.

The Corporation had previously revealed plans to repurchase up to £100mn of the £1.1bn in long-term debt it manages, which in turn forms part of the central assets the Society holds on behalf of the market.

And Lloyd's said it has now agreed to purchase a principal amount of £59,631,000 of its Perpetual Subordinated Capital Securities at a cost of £35,778,600. This is equivalent to 60p in the pound, and 7p more than the minimum price it said it would pay for the buyback.

It has also agreed to repurchase a principal amount of EUR47,315,000 of its Subordinated Notes maturing in 2024 at a cost of EUR33,120,500, or 70c in the Euro - its targeted price for the buyback.

However, the repurchase will not see the Corporation buy back any of the £300,000,000 of Subordinated Notes it had earlier said it would tender a minimum of 80p in the pound for.

A Lloyd's spokesman told The Insurance Insider: "The offers received also gave us the flexibility to purchase various combinations of all three securities. Our objectives were best met by purchasing the amounts announced, which do not include any of the 2025 Notes."

Lloyd's said the transaction would allow it to benefit from the discount "without materially affecting its capital position" and would provide "a degree of liquidity to those holders whose securities are accepted in the invitation".

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