RenRe steps towards bond market for quick line-up of Validus financing

Global reinsurer  RenaissanceRe is making early overtures towards the bond market as it moves to potentially wrap up financing of its pending  purchase of peer Validus Re from AIG.

RenRe prepped a framework for bond issuance that could round out the financing for the nearly $2.735 billion cash payment due at closing of the Validus Re deal in Q4. But terms and timelines remain missing throughout.

Gestures towards the bond market follow word of the deal that will see RenRe pay AIG $2.74 billion in cash and $250 million in new equity for AIG’s broad reinsurance operations, chiefly Validus Re, exclusive of 95% of reserve development, plus the ILS manager AlphaCat and renewal rights to the treaty reinsurance book at Talbots.

RenRe started the preparation with a quick issue of 6.3 million new shares plus a 945,000 share options for underwriters.

The SPO brought in approximately $1.352 billion in net proceeds after underwriting discounts and costs, RenRe noted in its latest market filing.

The pending senior unsecured notes with fixed rate coupon will be pari passu to all other unsubordinated debt but would be forced to early redemption should the Validus Re deal fall through.

RenRe had additionally put $1.55 billion on stand-by bridge financing at Morgan Stanley.

At March 31, RenaissanceRe had just over $1 billion of cash on hand. Treating the new equity as pure liquidity, RenRe is still well short of purchase price.

RenRe may nonetheless wish to remain both over-capitalised and over-liquid through the lead-up to the Q4 transaction. Company officials have suggested that organic growth plans remain full steam ahead for this year.

Indirectly, AIG will also help finance the deal. As part of the sales agreement, AIG has agreed to put up to $500 million into the RenRe third-party capital vehicles that RenRe will be using to back reinsurance liabilities from Validus.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.