CNA Financial Completes Sale of $750 Million of New Preferred Stock to Loews

Chicago-based CNA Financial Corporation announced that it has completed its previously announced plan to sell $750 million of a new issue of preferred stock, called Series H Cumulative Preferred Stock, to Loews Corporation, the owner of 90% of CNA’s outstanding common stock.

CNA indicated that “the terms of the new Series H Cumulative Preferred Stock have been approved by a special committee of independent members of CNA’s Board of Directors.”

Essentially the 8 percent dividend payments called for in the new shares are dependent on the financial strength rating of CNA’s principal insurance subsidiary, Continental Casualty Company. They have to rise by at least two notches, as determined by either A. M. Best, S&P or Moody’s in the first year, or one notch in following years.

The Preferred shares “will not be convertible into any other securities of CNA and will be non-voting. The preferred stock may be redeemed only upon the mutual agreement of CNA and a majority of the holders of the new preferred stock,” said the bulletin.

It also indicated that “The new preferred stock will rank senior to CNA’s common stock as to the payment of dividends and amounts payable upon liquidation, dissolution or winding up. No dividends may be declared on CNA’s common stock until all cumulative preferred dividends have been paid in full. CNA may not issue any equity securities ranking senior to or on par with the new preferred stock without the consent of a majority of the holders of the Series H Cumulative Preferred Stock. “

CNA intends to use the $750 million to repay debt, “including prepayment of $250 million in bank debt prior to December 31, 2002, to improve Continental Casualty Company’s statutory surplus” and for other corporate purposes.