Prudential Rights Prospectus, Underwriting Costs At GBP850 Million
May 18 2010 - 9:29AM
Dow Jones News
U.K. insurer Prudential PLC (PRU.LN) is spending around GBP850
million to pay the banks underwriting its GBP14.5 billion rights
issue and to prepare it rights-issue prospectus, the document
itself showed Tuesday.
Under the Miscellaneous section of the 940-page document,
Prudential said: "The total costs and expenses payable by the
Prudential Group in connection with the negotiation, preparation
and implementation of the transactions, including the issue of this
prospectus and the circular but excluding any costs associated with
hedging the consideration amount are estimated to amount to
approximately GBP850 million."
The bulk of the GBP850 million bill comes from the underwriting
fee of up to GBP507.5 million, which would be paid to the banks
supporting the rights issue.
The GBP507.5 million is derived from the 3.5% fee being paid to
the banks. Of that rate, 0.5% is discretionary and may be paid upon
completion of Prudential $35.5 billion purchase of AIA Group Ltd.
in the third quarter of the year, a company spokesman said.
The document showed that the underwriters will share between
them a commission of 2.50% on the proceeds of the rights issue.
The joint global coordinators--Credit Suisse (CS), HSBC Holdings
PLC (HBC) and JP Morgan Cazenove--will share between them a
commission of 0.5% of the proceeds.
The extra 0.5% consists of a further discretionary commission of
0.25% for the underwriters and another 0.25% discretionary
commission for the joint global coordinators.
The GBP850 million bill also includes the cost of a GBP5.5
billion subordinated debt taken out by Prudential to help boost its
capital surplus. The prospectus showed that the cost is $200
million.
Part of the bill will also go to the lawyers and accountants
involved in the deal.
The prospectus, released Tuesday morning, will now be reviewed
by shareholders in preparation of a vote June 7.
Prudential needs 75% of votes to have the rights issue
approved.
-By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0)
2078429486, vladimir.guevarra@dowjones.com
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