Hartford Paying Allianz $2.43B To Buy Securities
April 3, 2012 by N/A
| Associated Press |
HARTFORD, Conn. — The Hartford Financial Services Group Inc. said Monday that it will buy back debt and warrants from German insurance company Allianz SE for about $2.43 billion.
The Hartford, Conn., company said in a filing with the Securities & Exchange Commission that it plans to repurchase $1.75 billion in junior subordinated debentures due 2068 for approximately $2.08 billion, plus a payment of unpaid interest on the 10 percent debt.
It also plans to buy back outstanding warrants that allowed Allianz to buy approximately 69.4 million shares of its stock for $25.23 apiece. Hartford will give Allianz $300 million to buy back warrants under an existing $500 million repurchase program. The company said that it plans to complete the remaining authorization of about $106 million soon.
Hartford said that the move will give it more financial flexibility, improve its capital structure and create a better balance between its senior and subordinated debt. The company said that the action will also likely lower its annual interest expense, as it replaces high interest coupon debt with lower coupon debt.
Hartford is expected to buy back the debt and warrants, which were initially issued to Allianz in 2008, by April 17. Allianz will hold about 5 percent of Hartford’s outstanding stock once the repurchases are complete.
John Nadel of Sterne, Agee & Leach said in a client note that the move is a positive one for Hartford since its financial flexibility will improve.
“We continue to view Hartford as one of our favorite ideas as management continues to demonstrate a clear willingness to go beyond the status quo to deliver value for shareholders beyond that currently discounted in the share price,” Nadel wrote.
Last month Hartford said that it was exiting the annuity business so that it could focus on its property and casualty insurance, group benefits and mutual funds. The company said that it was also looking to sell or pursue other options for its individual life, retirement plans and broker-dealer Woodbury Financial Services, but would continue to seek out new business in them in the meantime.
That announcement came a little over a month after hedge fund manager John Paulson urged the company to spin off its property and casualty insurance business, saying that it could boost Hartford’s value to shareholders by 40 percent to 60 percent.
Paulson’s hedge fund, Paulson & Co. Inc. owns an 8.5 percent stake in Hartford and is the largest shareholder.
Shares of Hartford Financial rose 90 cents, or 4.3 percent, to $21.98 in afternoon trading. The stock has traded between $14.56 and $29.59 over the last year.
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