8-KMaterial AgreementsFinancial EventsSecurities & Listing+1

AFFILIATED MANAGERS GROUP, INC. 8-K Report, Material Agreement (Oct 18, 2007)

Filed October 18, 2007For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported on October 18, 2007, the closing of a significant institutional private placement of $500 million in convertible trust preferred securities. These securities are issued by a subsidiary, AMG Capital Trust II, and are backed by $500 million in junior subordinated convertible debentures issued by AMG. The net proceeds to AMG from this issuance were approximately $485 million. The company has earmarked a portion of these funds, approximately $206 million, for a prepaid forward purchase contract to acquire about 1.6 million shares of its common stock, with a settlement date in October 2012. The remainder of the proceeds is intended for general corporate purposes, including debt repayment. The trust preferred securities carry a fixed interest rate of 5.15% and mature in 2037, with provisions for contingent distributions and redemption under certain conditions.

Key Highlights

  • 1Completed a $500 million private placement of convertible trust preferred securities.
  • 2Net proceeds of approximately $485 million received from the issuance of junior subordinated convertible debentures.
  • 3Entered into a forward purchase contract to buy approximately 1.6 million shares of common stock for $206 million, settling in October 2012.
  • 4Trust Preferred Securities carry a 5.15% fixed annual distribution rate.
  • 5Securities are convertible into AMG common stock at an initial rate of 0.2500 shares per security (conversion price of $200 per share).
  • 6Proceeds will be used for general corporate purposes, including debt repayment, and to fund the share repurchase program.
  • 7All $300 million of COBRAs (Floating Rate Convertible Senior Debentures) are expected to be called in February 2008.

Frequently Asked Questions

The primary purpose was to raise capital through the issuance of convertible trust preferred securities by a subsidiary. The net proceeds of approximately $485 million are intended for general corporate purposes, including debt repayment, and to fund a significant share repurchase commitment.

AMG entered into a prepaid forward purchase contract to acquire approximately 1.6 million shares of its common stock for about $206 million, with settlement in October 2012. This contract allows AMG to lock in a purchase price for its shares, likely to manage future dilution from convertible securities or as part of a broader capital management strategy.

The Trust Preferred Securities have a 5.15% fixed annual distribution rate, mature in October 2037, and are convertible into AMG common stock at an initial price of $200 per share. They are also subject to potential contingent distributions and redemption under specific market conditions related to AMG's stock price.

The remainder of the net proceeds, after funding the forward purchase contract, will be used for general corporate purposes, which explicitly includes the repayment of indebtedness. This suggests AMG is aiming to deleverage its balance sheet or refinance existing debt.