Summary
The Hartford Financial Services Group, Inc. (HIG) filed an 8-K on April 19, 2012, reporting the termination of a material definitive agreement. Specifically, the company completed the repurchase of its 10% fixed-to-floating rate junior subordinated debentures due 2068, totaling $1.75 billion in aggregate principal amount, from Allianz SE. This repurchase, along with the buyback of Allianz's warrants to purchase common stock, was completed for a total consideration of approximately $2.375 billion ($2.075 billion for debentures plus interest and other fees, and $300 million for warrants). This transaction signifies a significant deleveraging event for The Hartford. By repurchasing these high-coupon debentures and dilutive warrants, the company is taking steps to strengthen its balance sheet and reduce future interest expense. The complete cancellation of the debentures also leads to the satisfaction and discharge of the related indenture, simplifying the company's capital structure.
Key Highlights
- 1The Hartford completed the repurchase of its $1.75 billion aggregate principal amount of 10% fixed-to-floating rate junior subordinated debentures due 2068 from Allianz SE.
- 2The repurchase of the debentures cost $2.075 billion, plus a payment for unpaid interest and $50 million for associated rights.
- 3The company also repurchased Allianz's warrants to purchase approximately 69.4 million shares of common stock for $300 million.
- 4The total consideration for the debenture and warrant repurchases was approximately $2.375 billion plus associated costs.
- 5All repurchased debentures have been delivered for cancellation, eliminating any outstanding 10% debentures.
- 6The associated indenture related to these debentures has been satisfied and discharged as of April 19, 2012.
- 7This transaction represents a significant deleveraging and simplification of The Hartford's capital structure.