Cash could be paid back to bondholders

RSA is raising £500m through a bond issue. This could be used to pay back its bondholders at the end of this year. The bonds were priced on 12 May and made available for purchase this week.

The bonds are callable on 20 May 2019, pay a coupon of 9.375%, which is 565 points more than government bonds. RSA said the transaction was expected to be rated BBB+ by Standard & Poor’s and Baa1 by Moody’s and will be listed on the London Stock Exchange.

A spokesman refused to comment on whether the funds would instead be used for acquisitions. He said they would only provide ‘additional flexibility’.

Ben Cohen, analyst for Collins Stewart said: “It has refinanced the debt and it’s now a few hundred basis points more expensive than the debt they already have.”

Last month, Insurance Times reported on growing speculation about RSA looking for global acquistions. Analysts believe RSA is in a good position to acquire more businesses abroad.

Adrian Brown, UK chief executive refused to comment on the group’s acquisition ambitions, when the group reported its 2009 first quarter results but said:

“We have consistently bought businesses over the past three-to-five years and generally they have been bolt-ons to our business.

“Whether it is emerging markets, internationally or in the UK we are constantly on the look out for opportunities at the right value to enhance our portfolio and that remains our strategy. We do have the capital to make bolt-on acquisitions.”