25th Mar 2014 08:13
LONDON (Alliance News) - RSA Insurance Group PLC Tuesday launched a GBP773.0 million fully-underwritten, discounted rights issue in order to shore up its balance sheet, as Chief Executive Stephen Hester's recovery plan for the troubled FTSE 100 insurer begins to take shape.
RSA, which has battled with increased claims costs and an accounting scandal in its Ireland business, is offering three shares for every eight owned by current shareholders at 56.0 pence each, a 40% discount to Monday's closing price. In early trading Tuesday, RSA shares are quoted at 93.24 pence, down 01.%
The rights issue is fully-underwritten by Bank of America Merrill Lynch and J.P. Morgan Cazenove, and will raise GBP748.0 million net of expenses.
The net proceeds will be held as cash or low-risk investments in order to improve RSA's capital strength and surplus over its capital requirements.
Hester said the rights issue will enable RSA to restore its capital position and carry out its plans without the risk of being forced into "suboptimal decisions" as a result of capital shortage or instability.
The intention to launch a rights issue was unveiled with RSA's preliminary results on February 27, when the insurer scrapped its dividend and reported a GBP244 million pretax loss.
On Tuesday, RSA said its core businesses remain "competitively strong and capable of good performance."
By Samuel Agini; [email protected]; @samuelagini
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