The FINANCIAL — Hartford Financial Services Group agreed to buy back $2.43 billion in securities from Allianz SE in order to give the company financial flexibility and improve its capital structure.
According to Borsa Italiana – London Stock Exchange Group, the company agreed to repurchase junior subordinated debt with a principal amount of $1.75 billion, as well as all outstanding warrants entitling Allianz to roughly 16% of Hartford's common stock.
After the repurchases go into effect, Allianz will hold around 5% of the company's shares. The repurchases are expected to close April 17.
The German insurer made a $2.5 billion capital investment in Hartford in October 2008 to shore up the company during the credit crisis.
Under the terms of the deal, Allianz bought $750 million of convertible preferred shares at $31 each and $1.75 billion in 10% junior subordinated debentures. Allianz also got 7-year warrants entitling it to purchase $1.75 billion of common stock at an exercise price of $25.32.
Hartford has largely turned itself around since the financial crisis, repaying a $3.4 billion bailout from the U.S. government, raising its dividend and unveiling a share-repurchase plan. Its bottom line took a hit last year from natural disasters like Hurricane Irene and other costs.
Shares were up 1.3% in premarket trading, to $21.36.