8-KOther EventsExhibits & Filings

ALLSTATE CORP 8-K Report, Corporate Update (May 16, 2016)

Filed May 16, 2016For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corp. (ALL) filed an 8-K on May 15, 2016, to announce a significant change related to its subordinated debentures and senior notes. The company has updated its "covered debt" under two Replacement Capital Covenants, which were established to benefit holders of its 6.75% Senior Debentures due 2018 (the "2018 Senior Notes"). Following a "Redesignation Date" on May 15, 2016, which is two years prior to the maturity of the 2018 Senior Notes, these notes are no longer designated as "covered debt." Allstate has now designated its 7.45% Senior Notes due 2019 (the "2019 Senior Notes") as the new "covered debt" under these covenants. This action ensures continued covenant protection for holders of the newly designated debt, potentially impacting Allstate's financial flexibility and debt management strategies going forward.

Key Highlights

  • 1Allstate has redesignated its "covered debt" under Replacement Capital Covenants.
  • 2The 2018 Senior Notes (6.75% due 2018) are no longer the "covered debt."
  • 3The 2019 Senior Notes (7.45% due 2019) have been designated as the new "covered debt."
  • 4This change was triggered by the "Redesignation Date" occurring two years prior to the maturity of the 2018 Senior Notes.
  • 5The Replacement Capital Covenants were originally established for the benefit of holders of the 2018 Senior Notes.
  • 6The covenants now protect holders of the 2019 Senior Notes.

Frequently Asked Questions

The Replacement Capital Covenants were established to provide certain protections for the holders of Allstate's senior debentures. Specifically, they obligate Allstate to maintain a certain level of "replacement capital" in connection with the issuance of junior subordinated debentures, ensuring a certain financial cushion is available for the benefit of designated senior debt holders.

The change was triggered by a pre-defined "Redesignation Date" in the covenants, which occurred two years before the final maturity of the 2018 Senior Notes. This is a standard provision in such covenants to ensure that the protection offered by the covenant remains relevant and applies to debt that has a longer maturity profile, rather than debt that is nearing its maturity date.

For investors holding the 7.45% Senior Notes due 2019, this redesignation is generally positive. It means that these notes are now the "covered debt" under the Replacement Capital Covenants, and they will benefit from the protections and obligations outlined in those covenants, which were originally put in place to support senior debt holders.

While this filing specifically addresses a contractual change related to debt covenants, it doesn't directly alter Allstate's existing financial health or leverage levels. However, the terms of the Replacement Capital Covenants may influence Allstate's future financing decisions and its ability to issue new debt or equity, as it must ensure compliance with the capital maintenance requirements for the benefit of the 2019 Senior Notes.