Two of the world’s biggest insurance companies have issued new debt securities, each totaling around $2 billion. AXA’s long-term subordinated notes were issued on terms previously announced; Allianz three year notes, however, offer mandatory convertibility into shares of three different companies.
AXA’s U.S. notes total $900 million at 8.60 percent for 30 years. The Euro offering is €650 million ($572 million) at 6.75 percent over 20 years – redeemable after December 15, 2010, and its GBP offering is £325 million ($472 million) for 20 years at 7.125 percent.
Allianz 3-year notes carry interest pegged to the DAX (German share index) plus 1.25 to 1.5 percent. The bonds must be converted into equity securities at some point during the three years, at the option of the buyer. In an unusual feature, Allianz then has the option of handing over the equivalent value in the shares of three companies, Munich Re, BASF, or E.on.
The structure, designed by UBS Warburg, is designed to give Allianz the flexibility it needs to divest some of its cross share holdings, and adds flexibility to its portfolio.
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