Assured Guaranty yesterday announced the launch of a combined $550 million offering of common shares and equity units and said it will increase the amount of cash and decrease the amount of stock it pays Dexia SA for its acquisition of Financial Security Assurance Holdings.
Assured plans to issue common shares with a value of $400 million, it said. It will also give its underwriters a 30-day option to purchase an additional $60 million in common shares.
It also plans to offer three million equity units at an initial amount of $50 each with an aggregate value of $150 million.
The units contain a forward purchase agreement - holders must buy Assured shares by June 1, 2012 - and 5% ownership in a $1,000 par value senior note issued by subsidiary Assured Guaranty U.S. Holdings and due 2014.
Assured Guaranty has given the underwriters the option to purchase an additional 450,000 equity units worth $22.5 million.
Fitch Ratings said it expects to give an A rating to the $150 million senior unsecured note issue. The rating watch will be evolving.
Assured plans to use the money it raises from the offerings to increase the cash portion and decrease the stock portion it pays for its acquisition of FSA, which excludes the troubled financial products unit.
Assured agreed in November to pay FSA parent Dexia SA $361 million in cash and up to 44.6 million Assured shares, with the option to reduce the numbers of shares by up to half in return for cash of $8.10 per share.
Assured intends to exercise that option, reducing the number of shares in the transaction by approximately 22.28 million.
Assured closed down 12.08% yesterday to $12.44. The stock is up from a 52-week low of $2.69 it reached March 4.
Merrill Lynch and Deutsche Bank Securities are joint book-running managers for the common share offering, while Merrill will be book-running manager for the equity units offering.
Assured agreed to acquire FSA from Dexia as the Franco-Belgian bank sought to reduce its risk exposures after receiving financial support from three European governments.
Dexia and the French and Belgian governments will retain all financial responsibility for FSA's troubled financial-products unit.
Assured and Dexia last week announced they had met all preliminary closing conditions. They expect to complete the deal on July 1.
Executives have said that both bond insurance units, Assured Guaranty Corp. and Financial Security Assurance, will continue to write new business after the acquisition.
FSA will only write new public finance business.
Assured Guaranty has insured 797 issues with a par value of $16.6 billion this year, according to Thomson Reuters. It backed 1,002 issues last year with a par value of $26.5 million.
FSA has so far this year insured 276 issues with a par value of $2.7 billion. Last year it backed 1,417 issues with a par value of $39.2 billion.