Friday 20 March 2015 by Justin McCarthy Trade opportunities

Swiss Re launches tender offer

Swiss Re launched a tender offer on 18 March for a number of Tier 1 perpetual securities, including the AUD fixed and floating securities callable on 25 May 2017.

Swiss Re launched a tender offer on 18 March for a number of Tier 1 perpetual securities, including the AUD fixed and floating securities callable on 25 May 2017. A summary of the key dates and terms is provided below.

Importantly, there is a cap on the total amount that can be accepted under the tender of €750m and there is a priority of tender being:

  • 1st priority – €1bn 5.252% Perpetual Step-Up Notes with a call date of 25 May 2016 (ISIN XS0253627136) at €106.00
  • 2nd priority – USD$750m 6.854% Perpetual Subordinated Step-Up Preferred Securities with a call date of 25 May 2016 (ISIN US87089AAA60 and USG86303AA52) at USD$106.75
  • 3rd priority – AUD$300m 7.635% Perpetual Step-up Notes (ISIN AU3CB002474) and AUD$450m Floating Rate Perpetual Step-Up Notes (ISIN AU3FN000253) both with a call date 25 May 2017 at AUD$108.25 and AUD$99.50 respectively.

In addition to the above, accrued interest will also be paid.

The tender price for the EUR and USD securities appears to be very attractive. At the tender prices offered, the EUR securities would be priced around 5 to 10 basis points (bps) over swap, the USD securities around 50 to 60 bps over swap and the AUD securities around 150 to 160 bps over swap.

Given the very attractive tender offer pricing for the EUR and USD securities that are both in priority to the AUD securities and the €750m total tender cap, it is very possible that there will be limited or no availability remaining for the AUD tender.

Further, if there was remaining availability under the cap for the AUD securities to be tendered, the arranger reserves the rights to treat the fixed and the floating AUD securities differently in the allocation process.

Swiss Re intends to issue a new EUR denominated Tier 1 security. If this issue does not proceed, then the tender can be called off.

Deadline for acceptance of the tender is 31 March 2015, however FIIG Securities’ custodian, JP Morgan, has yet to advise us of their deadline which is typically 3-4 days prior.

All holders of any of the securities subject of the tender will receive an official notification from our Custodial Services team after JP Morgan advise FIIG of the requirements should they wish to participate in the tender.

Since the announcement of the tender, the AUD Swiss Re securities have risen in price and are now trading close to the tender levels.

Given the following:

  • Uncertainty of whether there will be any remaining cap for the AUD tender
  • The unknown allocation between AUD fixed and floating securities if there is availability
  • The possibility of the tender not proceeding if the new EUR denominated Tier 1 security does not proceed
  • The inability to trade/settle any securities that are tender until the entire process in completed (likely the first week in April), even if there is no allocation left for AUD securities

Clients may wish to exit now at improved levels with a high level of certainty, albeit slightly below the tender levels. Alternatively they can take the chances in the tender with the possibility of achieving a slightly higher price but no guarantee of allocation and no guarantee of a strong market bid remaining after the tender process. We continue to expect that Swiss Re will call all these securities at first call date.

For more information or a copy of the tender notice, contact your FIIG Representative. 

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