UK - Legal & General is restructuring its asset management operations and has issued a new convertible bond to help finance the reorganisation.
L&G, which is hoping to raise approximately £500m through the bond issue, is looking to transfer ownership of its fund management operations to new wholly owned subsidiaries within the company. The total cost of the transfer is projected at between £550m and £600m, with the bond issue financing the majority of the transaction. The shortfall will be met by L&G's internal resources.
Ultimate ownership of the fund management subsidiaries will be unchanged by the transfer, since both before and after the transfer, ownership rests with L&G. The insurer claims that the move will provide its asset management operations with increased flexibility in the development of their businesses.
The transfer, which is subject to the approval of the UK Financial Services Authority (FSA), will see L&G Investment Management and L&G Portfolio Managers come together to form one of the UK's biggest asset managers. Combined, the firms have more than £100bn in assets under management.
The other subsidiaries being transferred are L&G Assurance (Pensions Management) and L&G Unit Trust Managers. L&G Assurance provides pooled funds for corporate pension plan clients.
L&G expects to complete the bond issue by the third week of December. UBS Warburg and Goldman Sachs are acting as joint book-runners to the bond. The convertible bond, which will mature in 2006, is expected to carry a coupon of between 2.75% per annum and 3.25% per annum and a conversion premium of between 25% and 30%.
On conversion, the bond would result in the issue of ordinary shares equivalent to just under 5% of the Group's current outstanding share capital. The final terms of the convertible bond will be announced following completion of a book-building exercise.
By Geoffrey Ho
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