Zurich Financial Services (ZFS) plans to raise SFr600m (£250m) in new equity from institutional investors, through the launch today of Market Index-Linked Exchangeable Securities ("MILES").
The MILES, exchangeable into new Zurich shares, will expire in 3 years and are linked to the SMI(R) total return index (SMIC index).
ZFS chief financial officer Gunther Gose said: "The MILES exchangeable into our own stock is an attractive instrument for index-oriented institutional investors and is an innovative tool for the management of Zurich's capital base.
"The MILES strengthens our balance sheet by increasing our equity, provides liquidity and reflects our confidence in the future performance of the Zurich share price."
The structure of the MILES allows investors to fully participate in the performance of the SMIC index over the next 3 years.
In addition, investors receive an annual out-performance premium in cash of 1% of the SMIC index level fixed at issue. With respect to the MILES, the rights of shareholders for advance subscription are withdrawn.
The instrument is exchangeable at any time until maturity into ZFS shares. The number of shares delivered will depend on the performance of the ZFS shares relative to the SMIC index.
A higher relative performance will result in a lower number of ZFS shares delivered. The shares to be issued will originate from contingent share capital of a maximum of 3 million shares.
If ZFS neither outperforms nor underperforms the SMIC index, a total of approx. 1.5 million shares will be delivered.
This transaction allows ZFS to raise equity at attractive conditions, as the number of ZFS shares is determined upon the exchange date only, and a strong performance over the next 3 years will therefore minimize dilution.
Bookbuilding starts on Tuesday, 15 January 2002 and lasts until Monday, 21 January 2002 at the latest.
