Summary
Aflac Incorporated announced on November 24, 2009, that it has accepted an offer from Lloyds Banking Group plc to exchange two of its investment securities. This strategic move involves exchanging yen-denominated, Upper Tier II perpetual securities from Lloyds TSB Bank plc and Bank of Scotland plc into new yen-denominated, Lower Tier II fixed-maturity securities. These newly issued securities are structured as enhanced capital notes, which carry a conversion feature into common equity if Lloyds Banking Group's consolidated core Tier I capital ratio drops below 5%. This exchange, expected to settle on December 1, 2009, represents a significant adjustment to Aflac's investment portfolio and its exposure to the financial health of Lloyds Banking Group.
Key Highlights
- 1Aflac to exchange two investment securities with Lloyds Banking Group.
- 2Exchanged securities are yen-denominated, Upper Tier II perpetual notes from Lloyds TSB Bank plc ($222 million par value) and Bank of Scotland plc ($188 million par value).
- 3New securities will be yen-denominated, Lower Tier II fixed-maturity securities, structured as enhanced capital notes.
- 4Enhanced capital notes will convert to common equity if Lloyds Banking Group's core Tier I capital ratio falls below 5%.
- 5Exchange offer was announced by Lloyds on November 3, 2009.
- 6Transaction settlement is expected on December 1, 2009.