F&C announces debt exchange offer

London Stock Exchange listed asset manager F&C has announced a debt exchange offer to holders of the group's £260 million Subordinated Notes in a transaction that is aimed at taking advantage of prevailing market conditions to in order to further strengthen the group's balance sheet.

The proposed transaction will seek to offer to exchange up to 50% of the existing loan notes, which have a 6.75 per cent coupon and are currently trading at a price below par value, for new senior notes. The new notes will carry a fixed coupon of 9%, be repayable in 2016 and contain no financial covenants beyond negative pledge.

Based on an indicative exchange of half of the outstanding notes at 75% of par value and with an unchanged cash interest cost, the transaction will reduce gross and net debt by up to £32.5 million. This would both crystallise an accounting profit and increase shareholder equity by a similar amount.