DUBLIN: Investors hunting for yield after a global financial rout might well take a detour to the headquarters of a tiny insurance company hidden away along a highway in west Dublin.
Two days ago, just as world markets cratered, troubled Irish insurance company FBD Holdings Plc said it was weighing the sale as much as 100 million euros ($114 million) of subordinated bonds to bolster capital before new solvency rules come into place in January. The company may have to pay a coupon of about 10 percent as investor appetite for risky assets wanes, according to analysts at Merrion Capital and Cantor Fitzgerald LP.
“It will be an expensive issue,” said Raymond Tam, an analyst at CreditSights in London. “It should be able to meet the interest payments so it’s a good way to solve the solvency position. There’s a question over the appetite for investors to take such a small issue.”
FBD is the latest insurer to turn to junior bond markets to meet tougher solvency rules. Insurers in Europe issued $35.5 billion of subordinated debt instruments last year and about another $12 billion in the first half of 2015, according to analysts at Bloomberg Intelligence. Last month, Irish state-owned health insurer Vhi Insurance DAC said Warren Buffett’s Berkshire Hathaway Inc. granted it a subordinated loan.
