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Slaughter and May is advising Prudential plc ("Prudential") on the financing arrangements in connection with its agreement with American International Group ("AIG"), on terms for the combination of Prudential and AIA Group Limited ("AIA"). The combination will be effected through the acquisition of both Prudential and AIA by a new group holding company that will assume the name of Prudential plc. AIA is a leading life insurance organisation in Asia Pacific. Following a period of consultation with the FSA over the terms of the proposed acquisition, including the level of capital required to be held in respect of the enlarged group, Prudential announced on 17 May 2010 that the financing arrangements in relation to the proposed acquisition will include: · one or more offerings of subordinated debt securities to institutional investors to raise approximately US$5.3 billion; · a committed US$5.4 billion hybrid capital facility made available by Credit Suisse, HSBC and JP Morgan (the "Joint Lead Arrangers"), available for drawing where Prudential does not issue subordinated debt securities in an aggregate principal amount of up to US$5.4 billion. Drawings under the hybrid facility may be made in loan form or as listed notes, both of which will count towards Prudential's tier two capital resources; · the raising of US$100 million by Prudential through its ordinary course capital markets debt issuance programmes; · an agreement with AIA Aurora that it will subscribe for subordinated debt securities on completion of the proposed acquisition (subject to a maximum of US$1.875 billion) to the extent that the Joint Lead Arrangers are unable to procure subscriptions in full for subordinated debt securities of up to US$5.4 billion. This arrangement is subject to the consent of Joint Lead Arrangers; · a £1 billion committed contingent facility with the Joint Lead Arrangers which will be available to draw following completion of the proposed acquisition on the occurrence of stresses on Prudential's regulatory capital ratios. This facility, when drawn, will count towards Prudential's regulatory capital resources; and · the issue to AIG of US$3 billion perpetual mandatory convertible securities, converting to ordinary shares in Prudential and US$2 billion tier one notes. Both of these will count towards Prudential's tier one capital resources. Guy O'Keefe (partner), Matthew Tobin (partner), Alex Biles (associate), Andy Philips (associate), Caroline Boon (associate), Andrew Williams (associate).
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