Phoenix Group Holdings, the U.K.’s biggest manager of closed life-insurance funds, plans to raise 250 million pounds ($394 million) in a share sale to lower its debt burden. The shares surged.
The proceeds will be used to repay 450 million pounds of debt and extend the maturities on other commitments, the firm said in a statement today. It will also help lower bank debt to about 1.86 billion pounds from 2.37 billion pounds at the end of June and to pay a dividend of 26.7 pence per share, up 27 percent from 2011.
“I am delighted to announce today the re-terming of Phoenix’s debt through the injection of fresh equity, and a significant increase in the dividend per share, which we believe will provide policy holders with enhanced security and deliver excellent value to shareholders,” Chief Executive Officer Clive Bannister said in the statement.
The shares rose as much as 11.3 percent to 642 pence, the highest since June 9. The company said the issue price represents a discount of 15.4 percent to the closing share price on Jan. 29.
Phoenix, which buys life-insurance policies and profits by releasing capital from them as they mature, will get a new loan maturing in 2019 if it raises 250 million pounds in the share sale, it said. The debt being extended is due to repay in 2014, 2015 and 2016, according to data compiled by Bloomberg.
The financing may allow the company to access the debt capital markets, it said. Last year the company ended takeover talks with CVC Capital Partners Ltd., saying the private-equity firm’s valuation of the company was too low.