Lloyd’s announced plans to “return to the debt markets with a benchmark issue of Tier 1 perpetual subordinated debt.”
The bulletin said the “issue will give greater flexibility and liquidity to Lloyd’s, further strengthen central assets and reduce the cost of mutuality to Lloyd’s members.”
The exact size of the debt issue, and its specific terms, haven’t been determined as yet. Lloyd’s said it would do so “following an investor roadshow to UK investors, and will be subject to market conditions. An application will be made to list the debt on the London Stock Exchange.”
Lloyd’s CEO Richard Ward commented “Lloyd’s has never been in better shape. In the last year we have reported record profits, been upgraded to ‘A+’ by two rating agencies, and seen a line drawn under the past with the deal between Equitas and Berkshire Hathaway. Our return to the debt markets is testament to this strength.” He also cited the “capital advantages” to Lloyd’s members, which the new debt issue hopes to achieve.
Standard & Poor’s Ratings Services has assigned its ‘A-‘ long-term junior subordinated debt rating to the proposed debt issue, conditioned upon the finalization and review of the full terms and conditions of the issue.
A.M. Best Co. assigned an indicative rating of “bbb” to the subordinated capital securities as well as a positive outlook, which, it said “is in line with the outlook of the issuer credit rating (ICR) on the Society.”
Best also indicated that it “anticipates that the securities will replace the annual syndicate loans in Lloyd’s capital structure. This is likely to lower the cost of mutuality for the syndicate’s members, whilst providing a stable resource to the Society that does not fluctuate with the insurance cycle and market capacity.”
Best essentially endorsed Lloyd’s statement thatn the subordinated notes “are likely to introduce a manageable level of additional gearing for the Society and that the perpetual nature of the issue will enhance its financial flexibility.”
S&P credit analyst Peter Grant also indicated the “rating is predicated on the ‘A+’ long-term counterparty credit rating on the Society of Lloyd’s, and the subordination and interest-deferral features of the securities.”
Topics Excess Surplus Lloyd's
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