QBE slashes interest payments with 20-year deal

QBE has slashed its interest payments after finalising an $850m refinacing deal.

The deal effectively sees QBE raise $850m to pay off a $471m debt, while the rest off the money will be used to drive growth.

The Australian insurer said the funding came in the form of a 20 year zero coupon senior convertible securities (“SCS”) raising $850m.

The funds will be used to repay US$471m from a previous convertible securities issue in 2007 (“LYONs IV”), with the balance of funds to be used for general corporate purposes. The repayment means that QBE will not be issuing any of the 22 million shares under LYONs IV.

QBE chief executive Frank O’Halloran said: "The refinancing has provided theopportunity to substantially reduce our borrowing costs from 6.1925% interest per annum under the previous convertible securities issue to 2.5% per annum for the SCS and to raise additional low cost funds to support our ongoing growth.

"The annual average cost of our total borrowings is expected to reduce to around 5.7% compared with 6.8% at 31 December 2009."