Insurance Australia Group (IAG) is offering a new subordinated debt issue to wholesale investors in the hopes of raising at least $300 million.
Terms of the proposed issue include a December 2036 legal maturity, subject to non-viability conversion and rights of redemption. In case IAG is determined to be non-viable, the securities will convert into a number of ordinary shares.
It was noted that if conversion does not occur when required, the securities will be written off.
In addition, the issue features an option for IAG to redeem the securities at face value in December 2026 and quarterly on payment dates thereafter, and also at any time for certain tax and regulatory events. These would all be subject to prior written approval by the Australia Prudential Regulation Authority (APRA).
The insurance giant clarified that wholesale investors should not expect that APRA’s approval will be given for any early redemption.
“If not redeemed or converted or written-off beforehand, on a winding up of IAG the securities will be subordinated to senior creditors,” added the general insurance group.
The securities will have a notional face value of $10,000 per note and pay a floating rate of interest. IAG said the margin will be determined by a bookbuild process.
Meanwhile no shareholder approval is needed for the issue. The subordinated debt is expected to qualify as Tier 2 Capital, which should provide the insurer additional liquidity.
