Fairfax to invest €70m in FBD
Financial services company Fairfax has agreed to invest €70 million in Irish insurer FBD through a private placement of a convertible bond instrument.
Subject to FBD shareholder approval, the convertible bond will be a ten year Solvency II compliant instrument and will carry a coupon of 7 percent per annum, which will be payable semi-annually.
The conversion price has been set at €8.50, a 37 percent premium over the closing share price on September 15, 2015.
Unless previously redeemed, the convertible bond will be exercisable from year three to year ten.
As an interim stage in the transaction, an agreement has also been reached that FBD Insurance will issue at 12 percent per annum, a €70 million, ten year, tier 2 instrument to Fairfax. The tier 2 debt instrument will be exchanged for the convertible bond within seven days of group shareholders approving the issue of convertible bond.
Fiona Muldoon, interim chief executive, said: "This is a significant vote of confidence in FBD and in our future success.
“I am confident that the completion of this transaction helps our business plan with our core farming and small business customers and with our consumer customers also. It underpins the board's strong commitment to maintain healthy capital buffers as we prepare for the implementation of Solvency II."
Michael Berkery, group chairman, added: "I welcome Fairfax as a key additional investor in FBD. I am confident that Fairfax will be a good strategic partner for the group as we advance our plans to return to profitability.
“The board will strongly recommend this transaction to shareholders for approval given the clear benefits accruing to the group and our shareholders."
Prem Watsa, chairman and chief executive officer (CEO) of Fairfax, said: "Fairfax is delighted to become an investor in and partner to FBD. We have been a long-standing follower of FBD and its deserved reputation as a leader in the farm insurance sector in Ireland.
“This investment underlines our belief in the strength of Ireland's on-going economic recovery and in FBD's core franchise in the farming and agri-business sectors.”
