PRUDENTIAL was last night on the verge of thrashing out an emergency compromise with the City regulator, clearing the way for the release of its rights issue prospectus this week.
The British insurer is locked in talks with the Financial Services Authority over its capital structure after the planned $35.5bn (£24bn) acquisition of AIA in Asia. Last week the FSA vetoed the announcement of terms for the $21bn cash call being used to part-finance the merger because it was worried that capital held by the enlarged group’s Far Eastern operations would be difficult to transfer to the UK at times of severe financial stress.
It is understood Prudential has now offered to swap $5bn of senior debt underwritten by advisers Credit Suisse, HSBC and JPMorgan for a more expensive junior loan which would count as contingent capital.
The solution would be expedient for Prudential as it would avoid tapping investors for more cash through its rights issue or selling off assets.
Following a weekend of high-stakes negotiations between Prudential’s management and the regulator, the insurer’s long-awaited rights issue prospectus could be released as early as tomorrow morning.
Chief executive Tidjane Thiam and chairman Harvey McGrath have effectively staked their careers on pushing the deal through. The timetable for shareholders to vote on the rights issue has been pushed back after last week’s calamity. Prudential needs 75 per cent approval from investors.
Prudential is confident it can get the cash call away if it receives the green light from the FSA. But more irate comments from shareholders emerged over the weekend, with one investor describing Thiam as a “dead man walking”. The investor said the FSA clash did “not build confidence” in management’s organisation.