The Hartford announced today the closing of an offering of $600 million of 7.875% fixed-to-floating rate junior subordinated debentures due in 2042 and an offering of $1.55 billion of senior notes. The senior note offering consists of $325 million of 4.000% notes due in 2017, $800 million of 5.125% notes due in 2022 and $425 million of 6.625% notes due in 2042. This transaction had been announced several days prior to its completion.
The company plans to use the proceeds of the offerings to repurchase from Allianz SE (together with certain of its affiliates, “Allianz”), for aggregate consideration of approximately $2.125 billion, all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068, with an aggregate principal amount of $1.75 billion. This repurchase transaction will be conducted pursuant to the terms of a purchase agreement between the company and Allianz dated March 30, 2012.
Christopher J. Swift, Executive Vice President and Chief Financial Officer of The Hartford said the company was pleased with the level of investor interest in the offerings, which facilitate the repurchase of higher-coupon debt from Allianz, reducing The Hartford’s interest expense and improving its financial flexibility.
The repurchases of the debt along with the previously announced purchase of all outstanding warrants entitling Alllianz to purchase 69,351,806 shares of the company’s common stock are expected to close on April 17, 2012.
The repurchase of the 10% fixed-to-floating rate junior subordinated debentures due 2068 is contingent on a successful consent solicitation to terminate a related replacement capital covenant entered into for the benefit of the holders of the company’s outstanding 6.1% senior notes due 2041, or being otherwise permitted by the replacement capital covenant. The company commenced the consent solicitation from the holders of the 2041 notes on April 2, 2012. This press release does not constitute a solicitation of consents.
The repurchase comes on the heels of news that The Hartford would largely exit the life and annuity business, after facing withering shareholder pressure from activist shareholder John Paulson, who owns an 8.8% stake in the company.