Business Context and Reporting Period
Assurant, Inc. filed this Form 8-K on March 7, 2018, to report a material modification to the rights of security holders and other events related to a public offering of preferred stock. The filing details the issuance of 6.50% Series D Mandatory Convertible Preferred Stock to fund the acquisition of TWG Holdings Limited and refinance existing debt.
Key Financial Metrics and Capital Structure
- Offering Size: 2,500,000 Firm Shares plus 375,000 Option Shares (fully exercised), totaling 2,875,000 shares.
- Aggregate Liquidation Preference: $287.5 million ($250 million for Firm Shares + $37.5 million for Option Shares).
- Offering Price: $100.00 per share to the public; $96.50 per share to underwriters.
- Underwriting Discount: $3.50 per share.
- Net Proceeds: Approximately $276.7 million after deducting discounts, commissions, and estimated expenses.
- Dividend Rate: 6.50% annual rate on the $100.00 liquidation preference, payable quarterly commencing June 15, 2018.
- Conversion Terms: Mandatory conversion expected on March 15, 2021, into between 0.9354 and 1.1225 shares of common stock per preferred share.
Material Changes and Strategic Use of Proceeds
The primary material change is the establishment of the Series D Mandatory Convertible Preferred Stock, which ranks senior to common stock regarding dividends and liquidation. No dividends or distributions may be paid on common stock while any preferred shares are outstanding unless all accumulated preferred dividends are paid.
Management intends to use the net proceeds, combined with new indebtedness, cash on hand, and common stock consideration, for the following purposes:
- Funding the previously announced acquisition of TWG Holdings Limited.
- Refinancing existing 2.50% Senior Notes due 2018.
- Paying related transaction fees and expenses.
Guidance, Risks, and Contingencies
Redemption Contingency: If the TWG Acquisition is terminated or not consummated on or prior to December 17, 2018, the Company has the option to redeem all outstanding Mandatory Convertible Preferred Stock.
Forward-Looking Statements: The filing includes forward-looking statements regarding the completion of the TWG Acquisition and the use of proceeds. Actual results may differ materially due to significant uncertainties. The Company undertakes no obligation to update these statements.
Risk Factors: Investors are directed to the Company's annual and periodic reports for a detailed discussion of general risk factors.
Key Facts for Investor Verification
- Verify the status of the TWG Holdings Limited acquisition agreement and the December 17, 2018, redemption trigger date.
- Confirm the exact conversion ratio of preferred stock to common stock once the 20-day trading period prior to March 15, 2021, is calculated.
- Monitor the Company's ability to refinance the 2.50% Senior Notes due 2018 using the proceeds from this offering.
- Review the full Certificate of Designations (Exhibit 3.1) for specific limitations on dividend payments and voting rights.