Swiss Re has announced that the “main terms of the convertible perpetual capital instrument to be issued to Berkshire Hathaway have been finalized.” The funding agreement was announced at the same time as Swiss Re’s 2008 earnings results, which revealed an $862 million loss [See IJ web site https://www.insurancejournal.com/news/international/2009/02/05/97610.htm).
In the earnings announcement Swiss Re said it “is raising CHF 3 billion [$2.586 billion] of capital from Berkshire Hathaway Inc., subject to shareholder approval, and will consider further equity raising of up to CHF 2 billion [$1.726 billion], subject to market conditions.”
The full set of terms and conditions may be obtained on Swiss Re’s web site at: http://www.swissre.com/resources/d45f25004d5a5ec8b4bbfecedd316cf3-SwissRe20090313_CPCI_Berkshire percent20Hathaway.pdf .
The Instrument bears a rather hefty fixed interest rate of 12 percent per annum “on the outstanding face amount of the Instrument, payable semi-annually in arrears in cash, subject to Swiss Re’s right to defer interest payments.”
It also establishes a conversion price, “If and when Berkshire Hathaway elects to convert the Instrument,” of CHF 25 per Share ($21.11) – “subject to customary anti-dilution adjustments and a separate adjustment for rights issues in the next six months, if any, as described below.”
Swiss Re noted: “If converted in full today, the Instrument would convert into 120 million, or 24.8 percent, of our Shares, on an as converted basis (assuming Shares delivered on conversion are sourced from conditional capital.”
Source: Swiss Re – www.swissre.com
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